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From 1980 through 1989, NITCO maintained no written records
documenting its specific future business needs and plans.
From 1954 through 1994, NITCO did not declare and pay any
formal dividends to its shareholders.
L. Examinations Conducted of Petitioners' Returns, Notices of
Deficiency, NITCO's Petition, and Subsequent Formal Discovery
Conducted by Respondent in the Instant Cases
On or about August 3, 1990, a revenue agent contacted and
apprised Mr. Mussman and NITCO that the agent would be conducting
an examination. In an Information Document Request dated October
31, 1990, to NITCO, the revenue agent, among other things, asked
NITCO to elaborate with respect to its plans concerning the use
of its accumulated earnings. The agent's request, in pertinent
part, stated:
1. During my first visit, you enumerated the following
potential uses of the company's retained earnings:
At the present time, the Company is involved in
expansion:
(1) The Company has a plan to introduce fiberoptics to
its system. Engineering estimates have not been made
for the system.
(2) The Company is developing a cellular telephone
capability for the area. This area is a RSA, Rural
Statistical Area. This development is being shared
with two other companies, Monan and Pulaski-White.
However, the family members, not the Company, made the
investment.
(3) The Company would like to acquire the Monan
telephone exchange. There have been negotiations but
nothing has been put in writing about this. The
Company is closely held. As a result, there are no
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