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business operations. When CDC entered bankruptcy, the record
indicates that there was every intention to continue its
operations. Cf. Utah Bit & Steel, Inc. v. Commissioner, supra.
Throughout CDC's chapter 11 reorganization, Mr. West actively
worked on behalf of CDC trying to collect receivables,
negotiating with CDC's creditors, and managing CDC's litigation.
We are convinced that at all relevant times, CDC was ready,
willing, and able to drill wells if profitable drilling contracts
became available. CDC's drilling rigs were maintained in a state
of readiness for drilling. Unemployed rig hands were readily
available for employment on the rigs. CDC also had working
capital for conducting drilling operations. The funds in CDC's
SCA were available for these operations. As of June 30, 1986,
the balance in the SCA was $6,279,000. Mr. Barton testified that
the bank group would have allowed CDC to use these funds if a
profitable contract had been obtained.
Considering all the facts of record, we find that there was
a continuation of business by CDC at the time of the change of
ownership.6 Having concluded that section 1.382(a)-1(h)(6),
6 We note that petitioner contends that respondent is
collaterally estopped from arguing that CDC was not engaged in an
active trade or business because the bankruptcy court confirmed
CDC's plan of reorganization. Respondent contends that the
(continued...)
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