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April 1, 1970, and October 27-28, 1970, meetings, Terra’s
employees were permitted to participate in petitioner’s
employee incentive and investment savings plans, retirement
plans, executive deferred compensation plans, and manage-
ment performance plans.
Petitioner intended Terra to operate at a profit.
Petitioner’s and Terra’s management jointly prepared
Terra's proposed budgets. One of petitioner’s vice
presidents, Mr. William Rader, also worked with each of
Terra’s operational units in developing separate budgets.
Terra’s capital and operating budgets were considered for
approval at annual budget meetings of petitioner’s board of
directors and senior management and ultimately were
approved by petitioner’s board of directors. Terra’s and
petitioner’s management also jointly prepared business
plans for approval by Terra’s board of directors.
Petitioner charged fees for the administrative and other
services it provided to Terra and charged interest at the
fair market rate when it lent money to Terra.
Petitioner did not file a consolidated Federal income
tax return with any of its subsidiaries, including Terra,
during any of the years in issue. Terra’s separate Federal
income tax returns were signed by officers or employees of
Terra. Terra maintained separate books and records to
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