-50-
deduction would not necessarily provide funds when needed to buy
new cattle, and would provide no benefit if petitioner had no
income. If petitioner lost cattle due to contaminated feed, it
could take years to recover against the supplier. We conclude
that petitioner's accumulation of funds to self-insure the herd
was reasonable.
D. Conclusion
Petitioner's reasonable business needs exceeded its net
liquid assets as shown below:
1987 1988 1989
Herd expansion $1,425,000 $1,575,000 $1,575,000
Pollution control 50,000 550,000 1,000,000
Equip./constr. 2,210,000 2,105,000 3,900,000
Land 0 1,500,000 2,000,000
Debt retirement 3,300,000 0 0
Self-insurance
(herd) 3,300,000 3,900,000 3,900,000
Working capital16 0 636,285 641,988
Total $10,285,000 $10,266,285 $13,016,988
Net liquid
assets: $9,289,501 $10,141,109 $10,835,821
Petitioner has also shown that it needed working capital and
at least some accumulations for self-insurance for liability;
however, in light of the foregoing, we need not separately
discuss these points.
16 As conceded by respondent.
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