James Tinnell - Page 3

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          petitioner reported a substantial net loss from his mining                  
               Following an examination of petitioner’s tax returns for the           
          years at issue, respondent issued notices of deficiency in which            
          respondent proposed noncomputational adjustments2 to petitioner’s           
          tax returns as follows:                                                     
               (a) Respondent disallowed all of petitioner’s mining expense           
          deductions for each of the years 1991, 1992, 1993, and 1994;                
               (b) respondent disallowed part of petitioner’s alimony                 
          deductions for 1991 and 1992;                                               
               (c) respondent determined that petitioner received a capital           
          gain of $23,380 from the disposition of stock of Zila,                      
          Pharmaceutical, Inc. (Zila), for 1992;                                      
               (d) respondent determined that petitioner had unreported               
          income of $667,856 from the sale of Zila stock options and the              
          disallowance of a net operating loss for 1993;                              
               (e) respondent determined that petitioner had additional               
          royalty income of $3,726 from Zila for 1992; and                            
               (f) respondent determined that petitioner was liable for               
          additions to tax and penalties under sections 6651(a)(1), 6654,             
          and 6662(a) for each of the years at issue.                                 
               Respondent disallowed petitioner’s mining expense deductions           
          on the grounds that petitioner had failed to show that his mining           

               2Respondent also proposed several computational adjustments.           

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