James Tinnell - Page 11

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          should be to the southeast where documented gold shows are                  
          concentrated;14 and (3) the onsite sample preparation and                   
          assaying methods should be carefully evaluated.  As a result of             
          Mr. Cruson’s recommendations, petitioner abandoned the claims               
          covered by the Tinnell Prospect.  Thereafter, petitioner devoted            
          his attention to the Quartette Mine.                                        
          E.  Quartette Mine                                                          
               From 1991 through March 1996, petitioner pursued the                   
          development and exploration of the Quartette Mine near                      
          Searchlight, Nevada.  The Quartette Mine was owned by the Miller            
          family.15  The Millers were interested in having petitioner lease           
          their mine so that petitioner could transport rock from the                 
          Quartette Mine to his mill site where it would be crushed and               
               Petitioner hired Mr. Cruson to evaluate the Quartette Mine.            
          Mr. Cruson prepared a report, dated December 10, 1993, containing           
          six conclusions and five recommendations.  Significantly, Mr.               

               14This area was located near petitioner’s mill site (also              
          known as the Roman mine site) and represents the bulk of                    
          petitioner’s claim area.                                                    
               15L.R. Tinnell was married to one of the Millers.  They were           
          divorced by 1993 but remained relatively close.                             
               16In November 1993, petitioner formed Complex Resources                
          Development (CRD) to take advantage of the development of the               
          Quartette Mine and petitioner’s claims.  CRD was intended to be             
          the operating company of a future joint venture controlling the             
          Quartette mining operations.  CRD never became active and never             
          filed a Federal income tax return.                                          

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