Hugh T. Brown, Jr., and Kristi L. Brown - Page 6




                                        - 5 -                                         
          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                 





Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011