General Dynamics Corporation and Subsidiaries - Page 12

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          transportation contract.  That use occurred between June and July           
          of 1981, when one of the tankers transported LNG from                       
          Everett/Boston, Massachusetts, to Elba Island, Georgia.  The LNG            
          being transported was originally from Algeria.  For that                    
          transportation, Lachmar received gross compensation of                      
          $2,038,468, which resulted in a gross profit of $588,228.  The              
          $2,038,468 was paid $1,349,581 in 1981 and $688,887 in 1982.  Due           
          to the domestic use of one of the tankers, Lachmar obtained an              
          exception from the Federal Government; otherwise it would have              
          risked losing all of its Government subsidies.  The two tankers             
          made voyages between Algeria and Louisiana a total of four times            
          during 1982 and seven times during 1983 under the transportation            
          contract.  Thereafter, the LNG and transportation contracts were            
          breached, and the tankers were stored in Virginia until 1988 and            
          1989, at which time they no longer belonged to Lachmar and began            
          service transporting LNG in foreign commerce.                               
               On Lachmar’s Federal partnership returns, for purposes of              
          claiming credits and depreciation allowances, Lachmar reported              
          that one of the tankers was placed in service in 1980 and the               
          other in 1981.  Respondent questioned the placed-in-service dates           
          reported by Lachmar, and after the tax audit, the parties agreed            
          that one tanker was placed in service on January 1, 1981, and the           
          other on July 1, 1981.                                                      

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