-45-
1987 and $308,299 for 1988. Projected expenses exceeded actual
expenses by $1,827,829 for 1989. This confirms that petitioner
intended to spend the amounts it accumulated for equipment and
construction within the projected time periods. See sec. 1.537-
1(b)(2), Income Tax Regs. We hold that petitioner reasonably
accumulated $2,210,000 in fiscal year 1987, $2,105,000 in fiscal
year 1988, and $3,900,000 in fiscal year 1989 for equipment and
construction.
b. Land Development
Petitioner contends that it needed to accumulate $2,000,000
during the years in issue to buy land.
Respondent argues that petitioner had no plans to move its
operations to a less populated area and to develop its land into
a planned community during the years in issue, and that it was
not reasonable for petitioner to accumulate funds to develop
land. Respondent argues that because the dairy is a pre-existing
use, Clay County will never force it to relocate. We need not
consider this point because petitioner did not accumulate funds
to move its operations.
Respondent argues that petitioner bought the Union Camp
property in December 1990, after respondent began a tax audit of
petitioner in February 1990, to avoid liability for the
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