July 6, 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,  and have again  authorized
David Smith of our company to prepare the  company's  responses  to each of your
inquiries in the space below.

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 does not believe that the sale of the warrants  falls under the
     consideration  of EITF 01-9. As indicated in the previous  comment response
     dated June 10, 2005,  the warrants were sold for cash, and a portion of the
     proceeds  (see  comment  3  response)  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.  Dolphin paid for the  simulators,  the  management
     agreement,  and the warrants in one lump sum,  and we  allocated  the price
     paid  amongst the  aforementioned  deliverables  using  guidance  from EITF
     00-21.

     Accordingly, please tell us the following:

          a)   The fair value and assumptions used to estimate the fair value of
               your common stock warrants.

               The Company used the following  assumptions for the Black Scholes
               calculation  for the value of the  warrants:  Risk Free  interest
               rate of  3.55%,  5 year  period  and a  volatility  of 121%.  The
               calculated  value of the  warrant  was  approximately  $0.056 per
               warrant.

          b)   How you recorded the  allocation of cash received to common stock
               warrants,  your  management  agreement,  and  simulators  in your
               financial statements.

               The fair value of each of the three  deliverables  was  allocated
               based on each  deliverables'  proportionate  value  to the  total
               value of the simulators,  the management services agreement,  and
               the  warrants.  Details  of this  allocation  may be found in the
               latter part of the response to comment 3 below.

          c)   The impact on your  historical  financial  statements  if you had
               applied  EITF  01-9  to  reduce  the  amount  attributed  to your
               management   services  agreement  and  simulators  prior  to  any
               allocation under paragraph 12 and 13 if EITF 00-21.

               If the Company had not  allocated  any amounts to the  management
               services  agreement,  the value  allocated to the warrants  would
               have increased to $160,662 or $8,539.  The gain on the sale would
               have  increased by $73,208,  thereby adding net equity of $81,747
               or the value of the  management  agreement.  As  explained in the
               response to comment 3, the  Company  believes  that the  matching
               principle  would  dictate  that  some  value be  assigned  to the
               management services agreement.

               The Company does not believe that the sale of the warrants  falls
               under  the  consideration  of  EITF  01-9.  As  indicated  in the
               response to comment 1 above,  and in the previous comment letter,
               the  warrants  were sold for cash,  and a portion of the proceeds
               (see comment 2 and 3 responses below) were allocated to the value
               of the warrants.


<PAGE>

Question:

2)   Notwithstanding  your responses to the above  comment,  please explain your
     basis for  recognizing  income on the sale of an equity  instrument.  Also,
     tell us how you are  accounting  for these  warrants on the  balance  sheet
     under EITF 00-19 with the relevant support for that accounting treatment.

Response:

     The Company has not recognized  revenue from the sale of the warrants.  The
     purchase  price was allocated to the various  deliverables  per EITF 00-21,
     and that allocation of the fair value of the warrants  resulted in a credit
     to  additional  paid in capital of $152,123 and a debit to cash in the same
     amount.  Please  review  the  10-KSB  to see  that  amount  located  in the
     statement of stockholders equity as a credit to additional paid in capital.
     The Company  believes that this accounting is compliant with EITF 00-19 and
     is properly classified as permanent equity.


Question:

3)   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.  In addition, please show us how you allocated
     the   arrangement   consideration   between  the  delivered  item  and  the
     undelivered  item.  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.  The
     Company  believes that the  determination  of fair value for the management
     service  agreements  sold in the future will be determined by the Company's
     past activities  associated with its simulators.  Accordingly,  the Company
     believes  that the past  values  have and will  support  the  costs  `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)'. 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  Company  believes  that  the  allocation  of costs to the
     management service agreement is appropriate,  thereby deferring some of the
     revenue in order to most  effectively  match  future  revenues  with future
     costs.  The  Company  believes  that  had it not  allocated  a value to the
     service  agreement,  the  nature  of the  transaction  would  not have been
     presented to the investor community in an accurate manner.

     The Company recorded the allocation of the transaction as follows:

     A)  Determined  the fair value of the Sims sold as  $2,460,546 or 84.78% of
     the total value.  Determined  the fair value of the warrants as $287,308 or
     9.9% of the total value using the Black Scholes model.  Determined the fair
     value of the management agreement as $154,417 or 5.32 % of the total value.

     B) The percents  noted in 1) were then  allocated to the purchase  price as
     follows:  Total purchase price of $1,536,600 times 84.78% was 1,302,729 for
     the  simulators,  $1,536,600  times 9.9% was  $152,123 for the warrants and
     $1,536,600 times 5.32% was 81,747 for the mgmt agreement.



<PAGE>

Question:

4)   We note that you did not record any expense  associated with the guarantees
     provided by your principal shareholders. Please explain to us in sufficient
     detail how you determined that these guarantees have no value. For example,
     would  you have been able to obtain  this  financing  under the same  terms
     without your principal shareholder guarantees?

Response:

     The  Company  believes  that it could have  obtained  the  financing  under
     similar  terms  without the  guarantee of the  principal  shareholder.  The
     Company  maintains  that the  guarantee of the principal  shareholder  only
     expedited the negotiation  process,  and that no reasonable estimate of the
     fair value of the personal guarantee was or is determinable.

                                     * * * *


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