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1. 1988
Petitioner bought the El Rancho Motel (the motel) in Deming,
New Mexico, for $175,000 on October 1, 1988. He owned and
operated it during the years in issue. He paid $50,000 as a
downpayment and agreed to pay the balance at $1,385.88 per month.
He had gross receipts of $3,193 and expenses of $9,512 (including
$1,819 for depreciation) from the motel in 1988, for a net loss
of $6,319.
Petitioner reported no other income or deductions for 1988,
1989, and 1990. Petitioner spent $12,600 for personal living
expenses in each year in issue.
2. 1989
Petitioner had gross receipts of $10,500 and expenses of
$35,104 (including $11,806 for depreciation) from the motel in
1989, for a net loss of $24,604.
On March 3, 1989, the Valencia County Sheriff's Department
arrested petitioner in Valencia County, New Mexico, for
possession of marijuana with intent to distribute. He owned a
Ford pickup truck in which he was traveling that had a
compartment in the gas tank which concealed 70 pounds of
marijuana wrapped in cellophane. The marijuana had a wholesale
value of $56,000. He had $1,447.97 in U.S. currency and 365,670
Mexican pesos with him when he was arrested. The Valencia County
Sheriff's Department seized the truck. Petitioner was charged,
convicted, and placed on probation for 1 year for this offense.
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