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record contains no support for these allegations. That
petitioner’s business was interrupted for 3 months does not imply
that petitioner could have expected or did expect the need for a
3-month reserve. Nor do we understand why operating costs, which
are generally not incurred during a period of business
suspension, would be an appropriate measure of the funds needed.
The argument is a transparent effort to rationalize accumulations
after the fact, and respondent properly rejected it.
Building Improvements and Equipment Replacement
Petitioner contends that plans for building improvements and
investment in new equipment, both executed during TYE 8/31/92,
justify accumulations of $450,000 at the end of TYE 8/31/90 and
TYE 8/31/91. Respondent allowed no amounts for these purposes
for either taxable year.
On its Form 1120 for TYE 8/31/92, petitioner reported
capital expenditures for building improvements carried out
between October 1991 and February 1992 at a cost of $352,420.
Testimony confirmed that this work consisted, in part, of
remodeling for which petitioner had submitted an architect’s
plans to the county for approval in or around January 1990. In
part, the work also involved correction of building code
violations. Petitioner had been notified of building code
violations on several occasions between early TYE 8/31/90 and TYE
8/31/91, and internal corporate documents indicate that some of
these violations were corrected before TYE 8/31/92. The most
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