SecProbe.io

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October 25, 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 June 20, 2005. I have also been briefed on
the telephone  conversation  that took place between David Smith of our company,
Jeff Jones,  our outside  auditor from HJ &  Associates,  and Josh  Forgione and
yourself from the  Securities and Exchange  Commission  (SEC). I have once again
authorized David Smith of our company to prepare the company's responses to that
telephone conversation.

Question:

1)   We read your  response to comment 1 and note that you  recorded the warrant
     transaction as a sale of warrants to Dolphin by allocating a portion of the
     transaction proceeds toward the purchase of the warrants. The consideration
     given to you by Dolphin  in the form of common  stock  warrants  appears to
     fall in the scope of EITF 01-9 as  contemplated in paragraph 10 and Exhibit
     01-9B, Example 3 and Exhibit 01-9D.

Response:

     The Company  continues to believe  that the sale of the  warrants  does not
     fall under the  consideration  of EITF 01-9.  As  indicated in the previous
     comment  response  dated June 10, 2005 and July 6, 2005,  the warrants were
     sold for cash, and a portion of the proceeds were allocated to the value of
     the warrants.  Issue 1-A of EITF 01-9 addresses  instances  where a "vendor
     may give a customer a sales incentive or other  consideration".  Issue 1-A,
     Paragraph  10 of EITF 01-9  addresses  instances  where "the  consideration
     consists of a "free product or  service...or  anything other than cash...or
     equity  instruments".  In our transaction,  there were no sales incentives,
     and nothing was given to the customer. Dolphin is not obligated to purchase
     additional  simulators.   There  were  never  any  discussions  that  would
     characterize  the sale of the  warrants  as some  kind of  sales  incentive
     required to sell the simulators. Dolphin desired to buy our simulators, buy
     warrants, and buy a management agreement.  Dolphin paid for the simulators,
     the  management  agreement,  and  the  warrants  in one  lump  sum,  and we
     acknowledge   allocating   the  price  paid   amongst  the   aforementioned
     deliverables  using  guidance  from EITF  00-21.  As a  consequence  of our

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     telephone  conversation  referred  to  above,  we  changed  our  accounting
     procedure  to record  the full  value of the  warrants  sold  when  Dolphin
     exercised its final option to purchase  additional  simulators on April 15,
     2005.

Question:

     2) We read your  response  to comment 3, and note that your  objective  and
     reliable  evidence of fair value of your  management  service  agreement is
     based on your historical  cost to maintain the existing  fleet.  Since this
     does not meet the criteria for entity-specific or vendor specific objective
     evidence of fair value,  we reissue our prior  comment 3. We wish to remind
     you that VSOE of fair  value is limited  to (a) the price  charged  for the
     deliverable  when it is sold  separately or (b), for a deliverable  not yet
     being sold  separately,  the price  established  by  management  having the
     relevant  authority (it must be probable that the price,  once established,
     will not change before the separate  introduction of the  deliverable  into
     the  marketplace).  Please tell us how you meet the  criteria in  paragraph
     9(b) in  determining  that the  delivered  item  meets  the  criteria  as a
     separate  unit of  accounting.  Refer to  paragraph  16 of EITF  00-21  and
     paragraph 10 of SOP 97-2.

Response:

     The  Company  acknowledges  your  reissuance  of comment 3. The Company has
     previously indicated the reasons why it felt that the criteria had been met
     for establishing a separate deliverable per paragraph 16 of EITF 00-21. The
     reissued comment notes that the historical cost of maintaining the existing
     fleet  is not  criteria  for  entity-specific  or VSOE of fair  value.  Per
     paragraph  16 of EITF  00-21,  the best  evidence  of fair  value is entity
     specific or vendor specific objective evidence (VSOE). As you stated above,
     VSOE of fair value can be determined  in one of two ways:  (a) the price of
     the deliverable when it is regularly sold on a stand alone basis, or (b) if
     the deliverable  has yet to be sold  separately,  the price  established by
     management  having  the  relevant  authority.  As with the  pricing  of any
     product or service by any  successful  company,  the price  established  by
     management  can only be determined  after the relevant costs of the product
     to be sold or service to be rendered has been calculated. The Company has a
     history  of  providing  the same  services  encompassed  in the  management
     service  agreement to the  simulators  it currently  owns. It would only be
     logical that the Company would use the cost experience it has gained in the
     servicing of its own  simulators  to determine  the price to charge for the
     management service agreement.

     As Paragraph 16 of EITF 00-21 expounds on VSOE of fair value, it references
     paragraph 10 of SOP 97-2.  This paragraph  ends with the statement  "When a
     vendor's  pricing  is based  on  multiple  factors  such as the  number  of
     products and the number of users,  the amount allocated to the same element

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     when sold separately must consider all the factors of the vendor's  pricing
     structure."  As the  Company  sells  more  of  the  simulators,  and  those
     simulators  become  seasoned,  the Company expects that it will continue to
     offer  management  service  agreements  which  will be  sold in  individual
     circumstances  as the  simulators  age past the  original  agreements.  The
     pricing of these  agreements  has and will  continue to be based on factors
     tailored to our operation,  such as the number of locations  covered by the
     agreement,  the number of simulators at each  location,  and the age of the
     simulators at each location.  The system to determine the price established
     by management having the relevant  authority for each management  agreement
     to be sold was developed with the  transaction  that took place on December
     31, 2004, and has now been used on three occasions.

     Our  management  service  agreement is similar to the lifetime  maintenance
     services that come with the sale of each car discussed in Example 4 of EITF
     00-21. In the example,  Company A uses "the amount charged on a stand alone
     basis by Company A for maintenance services,  and data available from which
     to estimate the volume and types of maintenance  services provided during a
     typical  customer's  ownership of the vehicle." How did Company A determine
     what price to charge for the maintenance  services?  Company A's management
     had to know what costs it would incur in providing  the service in order to
     determine the price for the services.  This is the same exact  exercise the
     Company  performed  when it  evaluated  the fair  value  of the  management
     service agreement.  The only difference is that we did not have the benefit
     of having sold those services on a stand alone basis, but there is no doubt
     any  successful  company  would have to base the price it charges  for such
     services on the costs it would incur to provide those  services.  With this
     cost data,  along with the knowledge of what types of maintenance  services
     would be  required  by the  simulators  based on  factors  tailored  to our
     company, management,  having the relevant authority,  established the price
     for  the  services   encompassed  in  the  management   service  agreement.
     Consequently,  we believe we have fulfilled the  requirements  to determine
     VSOE of fair value for the management  service  agreement.  With fair value
     established,  we also meet the  requirements for considering the management
     service  agreement as a separate  unit of accounting  under  Paragraph 9 of
     EITF 00-21.

     The  Company   believes  that  its  recording  of  the  December  31,  2004
     transaction  not only conforms to GAAP, but also meets the standard of fair
     presentation of our financial  statements.  In a letter dated June 27, 2005
     from  David M  Walker,  Comptroller  General  of the  United  States to the
     Technical Director of the Financial  Accounting Standards Board (FASB), Mr.
     Walker provides the U.S. Government  Accountability Office's (GAO) comments
     to the FASB Exposure  Draft  entitled The  Hierarchy of Generally  Accepted
     Accounting Principles. The Honorable William H. Donaldson,  Chairman of the
     SEC at the time,  was copied on the letter.  I have attached a copy of this
     letter as Exhibit 1 at the end of this response.

     In his correspondence,  Mr. Walker states "We support the FASB's efforts to
     improve the quality of financial accounting standards and its initiative to

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     move GAAP hierarchy into the accounting literature. ...At the same time, we
     strongly  believe that the standard  should also include a requirement  for
     the  enterprise to consider fair  presentation,  which is also discussed in
     SAS  69....We  believe fair  presentation  includes  considerations  beyond
     literal compliance with the specific  requirements of individual accounting
     and  reporting  standards  and,  consequently,  that the  enterprise  has a
     responsibility to evaluate  financial  statement  presentation for both (1)
     conformity with the individual standards and (2) overall fair presentation.
     If  literal  compliance  with  the  individual   accounting  and  financial
     reporting  standards  would lead to  misleading  financial  statements  and
     therefore preclude fair presentation, the enterprise should depart from the
     individual standards to the extent necessary to achieve fair presentation."

     Mr. Walker goes on to add "Also,  in the context of the Sarbanes  Oxley Act
     of 2002 (Act),  the Securities and Exchange  Commission  staff noted in its
     August 2002 release on the certification of company reports that management
     has to accept  responsibility  for ensuring that the financial  information
     provided to investors  fairly  presents the company's  financial  position,
     results of operation,  and cash flows. The SEC stated that it believes that
     fair   presentation,   as  used  in   managements   annual  and   quarterly
     certifications,  was  intended to "provide  assurances  that the  financial
     information disclosed in a report, viewed in its entirety, meets a standard
     of overall  material  accuracy  and  completeness  that is broader than the
     financial  reporting   requirements  under  generally  accepted  accounting
     principles.""

     Mr.  Jacobs,  we sold the  simulators  to a third  party at the end of last
     year, and titles  transferred  to them. If not for the  management  service
     agreement,  we would have no obligation to provide any additional services.
     As we  detailed  in our  last  letter  to you  regarding  this  issue,  the
     management  services  we expect to  provide  represent  less than 6% of the
     total  transaction,  and we agree that this  revenue  deserves the deferred
     treatment as we have it  recorded.  Your  interpretation  of EITF 00-21 (as
     stated in the  phone  conversation  referenced  above)  would  call for the
     entire  sale of the  simulators  and  the  management  services  agreement,
     (representing 90% of the transaction) to be recorded as deferred income and
     recognized over the life of the management service agreement.

     As I stated  previously,  the Company  believes  that its  recording of the
     December 31, 2004 transaction not only conforms to GAAP, but also meets the
     standard of fair  presentation  of our  financial  statements.  The Company
     strongly believes that if we were to incorporate the treatment of the
     December  31, 2004  transaction  as you  suggested,  we would not be fairly
     presenting the transaction or its impact on our financial  statements.  The
     Company  believes  that your  interpretation  of EITF  00-21 is the type of
     situation  Mr.  Walker is alluding  to in his letter  detailed  above.  The
     Company believes that your interpretation of the individual  accounting and
     financial reporting standards would lead to misleading financial statements
     and therefore  preclude fair  presentation.  We would then be placed in the
     precarious position of having to consider certifying  financial  statements
     that we feel the do not  fairly  present  the  financial  condition  of the
     Company.  As such,  the  Company  asks  that  you  please  reconsider  your

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     interpretation  of EITF 00-21 and your  proposed  treatment of the December
     31, 2004 transaction.

                                     * * * *

Thank you in advance for your  assistance  in ensuring our  compliance  with the
applicable   disclosure   requirements   and  in  our  efforts  to  fulfill  our
responsibility  of  fair  presentation  of  our  financial  information  to  the
investment  community.  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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                                   Exhibit 1

Accountability * Integrity * Reliability
United States Government Accountability Office               Comptroller General
Washington, DC 20548                                        of the United States

       June 27, 2005

       Technical Director
       Financial Accounting Standards Board File Reference No. 1300-001
       401 Merritt 7
       P.O. Box 5116 Norwalk, Connecticut 06856-5116
       Subject: Exposure Draft The Hierarchy of Generally Accepted Accounting
                Principles

       Dear Ms. Bielstein:

       The U.S. Government Accountability Office has reviewed the Financial
       Accounting Standards Board (FASB) Exposure Draft entitled The Hierarchy
       of Generally Accepted Accounting Principles. We are pleased to provide
       our comments on this very important issue.

       We support the FASB's efforts to improve the quality of financial
       accounting standards and its initiative to move the GAAP hierarchy into
       the accounting literature. We agree that the enterprise and not the
       auditor is responsible for selecting and applying accounting principles
       for financial statements to be presented fairly and in conformity with
       GAAP.

       At the same time, we strongly believe that the standard should also
       include a requirement for the enterprise to consider fair presentation,
       which is also discussed in SAS 69, and provide guidance for making
       judgments about it. We believe fair presentation includes considerations
       beyond literal compliance with the specific requirements of individual
       accounting and reporting standards and, consequently, that the enterprise
       has a responsibility to evaluate financial statement presentation for
       both (1) co