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totaling $2,075 and cash of $35,800, but denied that these
amounts represented charter receipts.
WDI
WDI was engaged in the construction and sale of condominium
units. WDI reported gross receipts of $1,342,216 and $1,624,352
in 1995 and 1996, respectively. Petitioner reviewed all of the
checks written from the WDI corporate account and often directed
the accounting code to which they should be charged. In 1995,
petitioner directed that invoices for expenses associated with
the Sir Winston be paid by checks drawn on WDI’s corporate
account. WDI then deducted the yacht expenditures as expenses on
its 1995 Federal income tax return. WDI’s bookkeeper questioned
petitioner about the payment of invoices for the yacht with
checks drawn on the WDI corporate account and was specifically
instructed by petitioner to record the checks for the yacht
expenses on WDI ledger accounts that he designated. Some of the
checks for the yacht expenses were recorded on WDI’s books as
“repair and maintenance”, while others were recorded as additions
to an asset account for a condominium building under
construction. The amounts recorded as repair expenses were
deducted on WDI’s 1995 return as current expenses. The asset
account charges were included in the “cost of sales” for
condominium units sold in 1995, resulting in a deduction in that
year.
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