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Returns, Forms 1120, for any of the taxable years at issue. No
written plans for petitioner’s expansion were ever prepared.
The threat of exclusionary zoning or closure by county
authorities provided another reason to explore other possible
locations. Krontz began looking for potential relocation sites
when his employment began in June 1990, and he continued his
search through the remainder of the years at issue. Initially
there was only an apprehension that petitioner might be required
to relocate at some time in the future. With the enactment of
Ordinance No. 3465 in October 1991, the date for petitioner’s
departure was fixed. Under the new ordinance adult entertainment
businesses were prohibited in all areas where prior zoning laws
had required them to locate and were permitted only in an area
from which prior law had excluded them. All existing adult
entertainment businesses rendered nonconforming by the zoning
change were required to cease operations at their current
locations by January 1, 1995. Krontz entered into negotiations
for the purchase of 16 acres in Mira Loma, California.
Negotiations probably began in late 1991 and continued into 1994.
Petitioner made an offer for the property of $1.15 million; the
owner made a counteroffer of $1.25 million. The parties were
contemplating a downpayment of $100,000 and seller financing for
the balance. Ultimately the parties reached agreement, but the
deal was abandoned before closing on account of a preemptive
zoning change in the Mira Loma area. Krontz looked for several
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