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Subsidiaries”. During the period when members of the
public held Terra stock, the interest of the public was
reflected in the “Minority Owners’ Equity in Subsidiaries”
section of petitioner’s consolidated balance sheet, and
in the “Costs and Expenses” section of its consolidated
statements of operations. Each prospectus and SEC Form
10-K filed by petitioner from 1970 until the date it sold
Terra included a detailed summary of petitioner's
relationship with Terra.
Neither petitioner nor CRA offered Terra stock for
sale in the ordinary course of its trade or business, and
neither ever recorded the Terra stock in an account
identified as a “hedge”, “hedging”, or “inventory” account.
Petitioner never referred to the Terra stock as a hedge
against increases in the price of petroleum products,
although risk reduction was one of petitioner's reasons for
forming Terra. Prior to July 1983, neither petitioner nor
CRA sold any Terra stock. Terra did not pay any dividends
to petitioner prior to May 1983. Terra's cash flow was
used exclusively to finance additional exploration and
production activities.
Other Exploration and Production Activities
Petitioner and CRA formed two other companies during
the period from 1970 to 1983 for the purpose of exploring
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