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2. Expansion of Costa Rican Manufacturing Facility
Petitioner's next ground set forth in its statement is that
it needed to accumulate $1,800,000 during each of the taxable
years in issue for building a second manufacturing facility in
Costa Rica. During 1988, petitioner constructed a 20,000-square
foot factory building in Costa Rica. The total cost of
purchasing, building, outfitting, and installing fixtures in the
facility and of training the workforce exceeded $1 million.
Production in Costa Rica proved quite profitable because the
labor and operating costs were lower than in Gainesville,
Georgia. Accordingly, during 1990 and 1991, petitioner embarked
upon a long-range plan to expand production in Costa Rica.
Additionally, petitioner determined that it required extra
manufacturing space to meet its current needs.
On January 13, 1992, the petitioner's board of directors met
and memorialized its plan to build a second manufacturing
facility in Puntarenas, Costa Rica. At the meeting, the board
adopted the following resolution:
That the board give serious consideration to the
investment in a second manufacturing facility in Costa
Rica in the newly established Free Zone Industrial Park
in the city of Puntarenas, Costa Rica. The government
of Costa Rica announced substantial labor subsidies to
companies that open plants in Puntarenas where much
unemployment exists. Our company requires extra
manufacturing space to fill the needs of our current
and future stores.
Although it would require a large outlay of money
to build, equip, and provide goods in process in the
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