-43-
and less than it actually spent for category two. In category
one, projected expenses exceeded actual expenses by $28,384 for
1988, and by $360,132 for 1989. In category two, actual expenses
exceeded projected expenses by $101,484 for 1987, by $741,695 for
1988, and by $987,947 for 1989.
We conclude that petitioner reasonably accumulated $50,000
for fiscal year 1987, $550,000 for fiscal year 1988, and
$1,000,000 for fiscal year 1989 for pollution control.
3. Capital Improvements
Petitioner has the burden of proof on this issue.
Gustafson's Dairy, Inc. v. Commissioner, supra.
a. Equipment and Construction
Petitioner accumulated $2,210,000 in fiscal year 1987,
$2,105,000 in fiscal year 1988, and $3,900,000 in fiscal year
1989 to buy equipment and vehicles and to make other capital
improvements. Respondent concedes that petitioner reasonably
accumulated $560,000 for fiscal year 1987, $1,155,000 for fiscal
year 1988, and $400,000 for fiscal year 1989 for those purposes.
Respondent disputes petitioner's claim that it needed to
accumulate funds to build more facilities to accommodate its
expanded herd. Respondent points out that petitioner had 7,585
cows in 1983 and contends that petitioner had no need to build
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