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Respondent determined deficiencies of $2,509 and $2,085 in
petitioners’ Federal income taxes for 1996 and 1997,
respectively. The issues for decision are: (1) Whether
petitioners’ gold mining activity was an activity engaged in for
profit during 1996 and 1997 within the meaning of section 183,
and (2) whether petitioners are entitled to deductions claimed on
Schedules C, Profit or Loss From Business, for expenditures
relating to their gold mining activity during 1996 and 1997.
Some of the facts have been stipulated and are so found.
The stipulations of facts and the attached exhibits are
incorporated herein by this reference. Petitioners resided in
Redlands, California, when the petition was filed.
Background
During the years in issue, Hugh T. Brown, Jr. (petitioner),
worked as a civilian employee for the U.S. Army Corps of
Engineers. His wife, petitioner Kristi L. Brown (Mrs. Brown),
was not employed outside the home during this time and listed her
occupation as “student” on joint Federal income tax returns for
the years in issue. Petitioners’ three children were,
respectively, 16, 20, and 21 years of age at the time of trial
(September 13, 2001).
Petitioner’s education after high school consisted of 2
years of junior college courses. Petitioner served 4 years in
the U.S. Army, and he was discharged in 1971. Between 1971 and
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