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petitioner reported a substantial net loss from his mining
activity.
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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Last modified: May 25, 2011