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Petitioner and Dr. Young informed Finley Kumble that they did not
want to ignore CAI's existence.
On October 27, 1980, attorneys from Finley Kumble met again
with petitioner and Dr. Young. In a letter bearing the same
date, Finley Kumble explained that the organization and operation
of CAI departed dramatically from the basic organization and
operation of a foreign corporation because: (1) CAI was
organized after the business activity of locating a source of
crude oil was well advanced and (2) CAI's primary business
activities were carried on in the name of BarSon. Given the
factual pattern of CAI's organization and operation, the letter
stated, the Commissioner could argue that the assignment of
income doctrine required that the income received from ABL be
taxed to BarSon or, alternatively, that section 367 provided that
petitioner and Dr. Young's transfer of their contractual rights
to CAI was a taxable transfer. Finley Kumble advised that each
theory created a substantial tax exposure to BarSon and to
petitioner and Dr. Young individually.
In a letter to petitioner dated December 9, 1980, Finley
Kumble reiterated its advice that the organization of CAI in
midstream created dangerous ambiguities. Finley Kumble cautioned
petitioner and Dr. Young that "defensive planning" had been
undertaken to deal with what had already occurred, that there
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