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Petitioner's shareholders and board of directors met on
December 1, 1987. The minutes of that meeting show that
petitioner would probably need to plug 38 wells at a cost of
between $10,000 and $40,000 per well. The minutes also show
that petitioner had begun negotiations to buy oil or gas projects
which required initial investments as follows: $130,000 for
Kelso; $450,000 for Quail Creek; $375,000 for Boren; and $760,000
for Turkey Creek. The board allocated $1 million to plug wells
and acquire new projects.
2. Revenue Agent's Contacts with Petitioner's Representatives
Richard Saul (Saul), respondent's revenue agent assigned to
this case, worked closely with Leonard Hochheiser (Hochheiser),
petitioner's representative. On October 5, 1989, Saul asked
Hochheiser for a copy of petitioner's tax returns for 1986 and
1987. Hochheiser gave those returns to Saul on November 10,
1989. On January 3, 1991, Saul asked Hochheiser to agree to
extend the time to assess tax for petitioner's 1987 year. Saul
received a letter on February 4, 1991, in which Hochheiser
declined. On February 6, 1991, Saul met with Hochheiser and
discussed petitioner's business generally and the audit. Saul
briefly mentioned section 531 as an issue to be considered. He
did not ask petitioner's owners or Hochheiser whether petitioner
needed to accumulate earnings or had plans to expand. Hochheiser
did not say whether petitioner had plans to expand.
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