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equipment. The machinery was operated by a small motorcycle
battery and could be collapsed and put into a backpack. It cost
petitioner about $1,000 to purchase the parts and peripheral
devices.
Petitioners’ revenue from gold mining activity during the
years in issue came from two sources: (1) The sale of the gold
itself at various trade shows that petitioner attended once or
twice each year, and (2) the fees petitioner charged to people
who occasionally accompanied him on guided tours on his weekend
mining expeditions. Each source produced about half the total
revenue of the gold mining activity during the years in issue.
In 1997, petitioner discontinued conducting guided tours of
abandoned mines because of the inherent danger of gold mining and
his potential liability if someone were to be injured. From that
point on, in petitioner’s words, he “zeroed in * * * on the
mining and prospecting venture.”
Petitioners filed joint Federal income tax returns for the
years in issue. With each tax return, they attached a Schedule C
for their gold mining activity, which they called Brown
Enterprises. On the Schedules C, they reported the following:
Income 1996 1997
Gross receipts $350 $525
Less: cost of goods sold 124 125
Gross income 226 400
Expenses
Advertising $143 $260
Car and truck expenses 3,574 5,011
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Last modified: May 25, 2011