SecProbe.io

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June 10, 2005

Mr. Steven Jacobs
Accounting Branch Chief
Division of Corporation Finance
United States Securities and Exchange Commission
Washington, D,C, 20549

Re: Interactive Motorsports and Entertainment Corp.
      Form 10-KSB for the year ended December 31, 2004
      File No. 000-30771

Dear Mr. Jacobs,

I am in receipt of your letter dated May 19, 2005, and have authorized David
Smith of our company to prepare the company's response to each of your
inquiries in the space below.

Form 10-KSB for the year ended December 31, 2004

Financial Statements and Notes

Note 2. Summary of Significant Accounting Policies
   L.        Revenue Recognition and Unearned Revenue

Question:

1.       We note your disclosure here and under Item 5. Please advise us of, and
         disclose in future filings, how you determined and recorded the fair
         value for the common stock warrants issued in connection with your sale
         to Race Car Simulation Corporation. In addition, specifically tell us
         how your accounting complies with EITF 96-18 and 01-9.

Response:

         The parties to the various agreements in this transaction are Dolphin
Direct Equity Partners, LP. ("Dolphin"), Race Car Simulation Corporation
("RCSC"), and Interactive Motorsports and Entertainment Corp ("IMTS"). We
recorded the warrant transaction as a sale of warrants to Dolphin, and allocated
a portion of the transaction proceeds toward the purchase of the warrants. The
fair value of the common stock warrants was determined using the Black-Scholes
valuation model. Appropriate data was input to determine volatility, the risk
free interest rate, and the term of exercise.

EITF 96-18 states that "Transactions in which equity instruments are issued in
exchange for the receipt of goods or services may involve a contemporaneous

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exchange of the equity instruments for the goods or services...." EITF 96-18
goes on to state "This issue address transactions described above in which...(2)
the counterparty receives shares of stock, stock options, or other equity
instruments in settlement of the entire transaction..."

It is our position that EITF 96-18 does not apply to this transaction. IMTS did
not issue the warrants in consideration of goods delivered, or services
rendered. The warrants were sold, and cash was received from the buyer for full
consideration of the transaction. IMTS did not receive any goods or services
from RCSC as a result of the transaction.

EITF 01-9 addresses how to account for consideration given by a vendor to a
customer in a sales transaction. Again, the warrants were sold to Dolphin, and
IMTS received cash for the warrants. IMTS also sold RCSC our NASCAR racing
simulators and a management agreement in the same transaction. The total
transaction was accounted for using guidance from EITF 00-21. The cash received
was allocated to the warrants, management agreement, and the simulators on a
pro-rata basis by using a fair value percentage.

Question:

2.       In a supplemental response, please summarize the relevant terms under
         your management service agreement with Race Car Simulation Corporation.
         In your response, include the relevant terms, deliverables and
         obligations under this arrangement. In addition, tell us what impact,
         if any, your non-performance under this arrangement would have on the
         Asset Purchase Agreement.

Response:

         The terms of the management service agreement call for IMTS to provide
maintenance services for the simulators that were sold, to negotiate terms for
existing and new revenue share agreements involving the sold simulators as may
be necessary from time to time, and to relocate the sold simulators to new
revenue share locations if necessary. The objective of the agreement is to
insure that the simulators are in a condition that allows the continued
production of the revenue stream resulting from the use of the simulators.

IMTS is compensated using a formula in the agreement agreed to by the parties.
It is management's expectation that it will take at least five years from the
initiation of the agreement before IMTS receives any compensation for its
services. The agreement terminates upon the mutual agreement of the parties to
do so.

Non-performance by IMTS of this management agreement could result in an increase
in the downtime of the simulators sold to RCSC. If the downtime were to increase
significantly, it could impair the ability of the parties who lease the
simulators from RCSC to make their revenue share payments to RCSC in a timely
fashion. If the revenue share payments are not made, or are late by a
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substantial time period, RCSC can instead require IMTS to make the revenue share
payment to RCSC, on behalf of the parties who lease the simulators from RCSC,
after providing notice as dictated in the Asset Purchase Agreement.  There is no
provision in the agreements for any type of refund of the purchase price.

Question:

3.       We note that you estimated and deferred the cost of services under your
         management service agreement. This does not appear to meet the criteria
         for entity-specific or vendor-specific objective evidence of fair value
         as discussed in EITF 00-21. In a supplemental response, please tell us,
         and disclose in future filings, how the delivered item in this
         arrangement meets the criteria as a separate unit of accounting. In
         addition, tell us how you allocated the arrangement consideration
         between the delivered item and the undelivered item. Refer to EITF
         00-21.

Response:

The overriding deliverable in this agreement is the company's obligation to
provide maintenance services for the simulators that were sold to RCSC. Per EITF
00-21, three criteria must be met to qualify as a separate unit of accounting. A
discussion of each criteria follows:

1)                The delivered item has value to the customer on a standalone
                  basis. That item has value on a standalone basis if the
                  customer has the ability to resell the delivered item.
                  Existence of an observable market for the deliverable is not
                  required. In this case, the obligation for IMTS to service
                  simulators for at least the next five years could be sold to
                  any other entity that has purchased or will be purchasing
                  simulators from IMTS. The five year period goes well beyond
                  the warranty we provide on simulators sold to third parties,
                  or the warranty provided by the manufacturers of the
                  components we use to assemble the simulators.
2)                There is objective and reliable evidence of the fair value of
                  the undelivered items. In this case, we relied on historical
                  data collected since inception on the cost to maintain our
                  existing simulator fleet. This analysis yielded a cost per
                  simulator that was then applied to the simulators sold to
                  RCSC, with the cost per simulator adjusted for inflation in
                  each succeeding year of the five year term before the company
                  expects to receive compensation for the services provided
                  under the management agreement.
3)                If the arrangement includes a general right of return relative
                  to the delivered item, delivery or performance of the
                  undelivered item is considered probably and in control of the
                  vendor. Although delivery of the maintenance services is
                  probable and under the control of IMTS, this criteria is not
                  applicable since there was no right of return afforded to RCSC
                  on the sale of the simulators.
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Based on the above criteria, we determined that the management agreement was
indeed a separate unit of accounting whose value could be readily determined.
Based on the same criteria above, we also determined that the simulators and the
warrants were also separate units of accounting. The determination of the fair
value of the management agreement was discussed in item 2 above. The
determination of the fair value of the warrants was discussed in the response to
Question 1 above.

The fair value of the simulators was determined by averaging the price per
simulator of the only three executed sales contracts that IMTS had entered into
prior to the sale of the 34 simulators to RCSC. The average price was then
adjusted downward for the fact that the three prior sales contracts were for new
simulators, while the sale to RCSC was for simulators that were not new. The
adjusted price per simulator was then multiplied by the number of simulators
sold at December 31, 2004 to arrive at the total fair value of the simulators
sold.

Once the fair values of the three deliverables were determined, the transaction
price was allocated to each deliverable on a pro rata basis of the total fair
value of all the deliverables. The sale of the simulators and the warrants were
recorded on the income statement, while the management agreement was recorded as
deferred revenue on the balance sheet.

Note 5, Debt and Credit Arrangements

Question:

4        We note here and in Note 9 that certain of your debt obligations are
         personally guaranteed by principal shareholders. Supplementally, tell
         us, and disclose in future filings, how you account for these
         guarantees. Refer to SAB Topic 5T (SAB 79).

Response:

         SAB Topic 5T describes how to account for the costs a company may incur
related to the debt from or a guarantee by a related party. IMTS does not incur
any expense associated with this guarantee from one of our principal
shareholders, nor do we place any value on this guarantee on our financial
statements. IMTS will disclose in future filings that no value has been
attributed to the personal guarantee of the principal shareholder.

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Thank you in advance for your assistance in ensuring our compliance with the
applicable disclosure requirements and in our efforts to enhance the overall
disclosures in our future filings. Please feel free to call me or David Smith if
you should have further questions. Our corporate office number is (317)
295-3500. My extension is 107, and David's is 102.

Sincerely,

/s/ William R. Donaldson

William R. Donaldson
Chief Executive Officer and Chief Financial Officer

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