Windsor Production Corporation - Page 5

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          deficiency to petitioner.  The accumulated earnings tax issue               
          was the primary adjustment determined by respondent.  Respondent            
          determined that petitioner had accumulated excess taxable income            
          of $116,291 in 1987, $76,275 in 1988, and $143,917 in 1989 that             
          was taxable under section 531.                                              
              On October 23, 1991, petitioner submitted a statement under             
          section 534(c) detailing its plans to expand its oil, gas, film,            
          and television businesses.  Petitioner attached copies of                   
          corporate minutes to verify the amounts of accumulated earnings             
          needed for each of petitioner's expansion programs.  Petitioner             
          also stated that it needed a reserve for contingent liabilities             
          from an NFC Oil Co. lawsuit settled in 1988, environmental                  
          liabilities including plugging oil wells, and breach of contract            
          and copyright violations.  Petitioner attached copies of                    
          corporate minutes to verify the amounts it needed for these                 
          reserves.                                                                   
              On November 27, 1991, petitioner filed the petition in this             
          case.  In it, petitioner denied that it was subject to the                  
          accumulated earnings tax and referred to the section 534(c)                 
          statement it filed in which it stated its needs to accumulate               
          earnings.                                                                   
              Respondent filed the answer on January 27, 1992, and an                 
          amended answer on February 24, 1992.  Respondent alleged that               
          petitioner's section 534(c) statement was not sufficient.                   





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