- 5 -
deeper than the first rig.4 Petitioner also purchased diesel and
electric welding equipment for $3,500. Later during the year,
petitioner purchased "Inner Kelly" equipment for use with the
recently purchased rig, at a cost of $30,962.
Although the second drill rig was in working order when
purchased by petitioner, he spent substantial time and money
renovating it, and keeping it in working order. From the end of
May 1985, through the beginning of July 1987, petitioner had no
employment other than his drilling operation, and devoted the
bulk of his waking hours working on the drill rig and looking for
jobs on which he could use it. Notwithstanding that petitioner
engaged in wage-earning employment after July 1987 for various
employers (see infra p.7), he continued to spend substantial time
on activities under the name "De Boer Drilling Co." Petitioner
spent approximately 80 percent of this time working on the drill
rig and 20 percent looking for drilling jobs.
For the purchase price and capital costs of work done on the
second drill rig from 1985 through 1989, petitioner claimed cost
recovery deductions of approximately $88,000. Petitioner also
claimed expense deductions for De Boer Drilling Co. of
approximately $113,000 during 1985 through 1991. During this
4The second drill rig is a Hughes Tool Co. Model TAP-120T,
also approximately 12 feet wide and 70 feet long, and weighing
approximately 150,000 pounds. This rig is capable of drilling
holes from 18 inches in diameter to 120 inches in diameter and
can dig efficiently to a depth of 120 feet.
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