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the material used in the vessel’s construction than under the
previous fixed-price contracts.
Real Property
On June 7, 1995, petitioner sold real property at 6729
Westfield Boulevard, Indianapolis, Indiana, to Evergreen, LLC for
$1,500,000. Prior to the sale, petitioner leased the property to
Winston Yacht and Country Club, Inc., a country club wholly owned
by petitioner. In November 1995, petitioner provided his return
preparer with a handwritten schedule that purported to list
improvements made to the property between 1990 and 1995 that
totaled $232,400. Petitioner had not previously advised his tax
return preparer of these improvements. The improvements were
included in the cost basis of $1,045,742 reported on petitioner’s
1995 return.
Respondent determined that petitioner’s claimed basis in the
property should be reduced by $232,400 for failure to
substantiate, resulting in a determination of unreported gain in
that amount.
Business Income
Yacht Charter Business
Petitioner was engaged in the yacht charter business in
1994, 1995, and 1996. Petitioner advised his return preparer,
and reported on his returns, that gross receipts from his yacht
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