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Mr. Arnold and Mr. West both testified that in 1986 CDC
maintained its rigs in a state of readiness for immediate return
to active drilling when the contract drilling market turned
around. Maintenance was performed at a cost of approximately
$20,000 per month. Maintenance was performed to keep CDC's rigs
in condition to return to active drilling in a matter of days if
the market for deep drilling improved.
In 1986 and through the time of the change of ownership, CDC
owned all assets necessary for a contract drilling business. CDC
had 15 rigs and related equipment, drill pipe, three rig yards,
and working interests in oil and gas properties. This is in
marked contrast to the taxpayer in United States v. Fenix and
Scisson, Inc., 360 F.2d 260, 268 (10th Cir. 1966), in which the
court stated that the “attempt to sell nearly all of * * *
[Oronogo's] equipment is incompatible with the idea that it was
merely standing by intending to resume operations should business
factors improve.” In Fenix and Scisson, Inc., the acquired
company (Oronogo) had attempted to sell between 80 and 90 percent
of its assets more than 3 years before the acquisition. The
court found that “Had they been completely successful in selling
equipment, they would have been unable to resume operations short
of repurchasing necessary equipment. We hardly believe Congress
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