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ending July 2, 1989. Each of these monthly financial statements
reflected total liabilities in excess of total assets and a net
operating loss for Clinch River that increased significantly for
almost every month, as set forth below:
Total Total Net Operating
Month Ending Assets Liabilities Loss (To Date)
July 31, 1988 $10,812,640 $12,231,286 $ (609,170)
Aug. 28, 1988 10,623,865 12,798,253 (1,309,637)
Sep. 25, 1988 10,745,749 13,978,696 (2,352,740)
Oct. 23, 1988 11,430,129 15,014,491 (2,651,004)
Nov. 20, 1988 10,468,891 14,703,381 (3,234,931)
Dec. 18, 1988 10,571,153 15,344,598 (3,704,189)
Jan. 15, 1989 10,518,158 15,573,595 (3,935,168)
Feb. 13, 1989 10,325,572 15,893,548 (4,340,926)
Mar. 12, 1989 9,200,617 15,190,987 (4,704,722)
Apr. 9, 1989 9,123,278 15,722,158 (5,206,418)
June 4, 1989 9,086,060 16,568,885 (5,938,446)
July 2, 1989 9,072,587 17,057,265 (6,372,108)
In order to cover expenses associated with production, the
paper mill apparently had to produce and sell at least 170 tons
of paper per day. As of January 25, 1989, the paper mill was
apparently producing only 150-170 tons of paper per day, dropping
to 123 tons per day as of April 9, 1989, and rising to 140 tons
per day as of July 30, 1989.
In summary, with regard to payments due from Clinch River,
as of February 28, 1989, the close of petitioner's 1989 taxable
year, petitioner had not received from Clinch River the
$1,956,000 balance due under the original October 1987 contract,
the $400,000 due under the first provision of the November 1988
contract, nor the $59,852 due under the first provision of the
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