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Lamont Gas Plant
At the outset, we note that petitioner reported the
gain realized from its sale of the Lamont gas plant in 1984
as ordinary income. In the subject notice of deficiency,
respondent recharacterized the gain as a capital gain,
pursuant to section 1231. Petitioner does not take issue
with respondent’s determination that the gain from the
sale of the Lamont gas plant is subject to section 1231.
Petitioner purchased, operated, and expanded the
Lamont gas plant as part of its main cooperative effort of
producing petroleum-based goods for its patrons. During
the time petitioner owned the plant, virtually all of the
natural gas liquids produced there were either sold to
petitioner’s patrons or used in producing gasoline for sale
to its patrons.
The sale of the Lamont gas plant took place after
feasibility studies suggested that advantages would be
gained in expanding petitioner’s natural gas liquids plants
in Texas. The bulk of the proceeds of the sale of the
Lamont gas plant went to expanding the Texas plants in
order to enable petitioner to realize those advantages for
the benefit of its patrons. Accordingly, we find that the
gain from the sale of the Lamont gas plant was realized in
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