James Tinnell - Page 5

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          mining at the University of Nevada bookstore.  Petitioner also              
          learned how to read geological mining maps.  Petitioner began               
          searching for gold and other precious metals on Federal land in             
          Clark County, Nevada.  By 1979, petitioner began locating mining            
          claims near Searchlight, Nevada.                                            
               On March 5, 1980, petitioner formed Jetco Enterprises, Inc.            
          (JEI), a Nevada corporation.  Although petitioner apparently                
          planned to conduct his mining activities through JEI at some                
          point, petitioner did not use JEI during the years at issue or in           
          prior years to report the results of his mining activities.                 
          Instead, petitioner conducted his mining activities as a sole               
          proprietorship doing business as Jetco Mining.6  Over the years,            
          petitioner employed his two sons, his daughter, and an ex-                  
          brother-in-law in his mining activity.7                                     

               6JEI, through and including the years at issue, did not file           
          Federal income tax returns.  JEI, however, issued shares of                 
          stock, held board meetings, kept minutes of corporate activities,           
          and otherwise observed all the formalities of a corporation.  At            
          the time of trial, JEI was in good standing with the secretary of           
          state of Nevada.  Petitioner is the sole shareholder and                    
          president of JEI.  Petitioner’s sons, L.R. Tinnell and Jaye E.              
          Tinnell, are secretary and treasurer, respectively.  JEI’s fiscal           
          tax year ends Jan. 31.                                                      
               7At the time of trial, petitioner still employed his two               
          sons in his mining operation.                                               

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