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Gold sales Sch. C expenses Net income/(loss)
Year reported reported from gold mining
1994 $ 770 ($18,934) ($18,164)
1995 1,540 (23,953) (54,413)
1996 585 (11,481) (11,481)
Petitioner also reported a net loss of $14,486 for 1997.
Similarly, petitioner did not make a net profit from his gold
mining activity in 1998, 1999, or 2000, although at trial he did
not know the exact amounts of his losses for those years.
Thus, in 7 years of operations, which do not include his
prospecting years prior to 1994, petitioner has established only
a string of losses with no indication of realizing any profit.
As this Court has stated:
We recognize that gold mining is a risky business and
also that if it is successful it will pay off well, and that
some people are willing to take the risk for the anticipated
reward. But where, as here, efforts had been made to mine
this property for years, according to the evidence, without
sufficient production to report any income from mining, it
would be a pipe dream to expect to make a profit without
some change in circumstances, and there is no evidence that
changes were made that would materially increase production.
Cannon v. Commissioner, T.C. Memo. 1990-148, affd. 949 F.2d 345
(10th Cir. 1991). This factor favors respondent.
The amount of profits in relation to the amount of losses
incurred, and in relation to the amount of the taxpayer’s
investment and the value of the assets used in the activity, may
provide useful criteria in determining the taxpayer’s objective.
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