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predecessors, (2) the application of sections 382 and 269 to
petitioner's acquisition of Tri-Power, and (3) the tax
consequences of Tri-Power's recapitalization.
By letter dated November 17, 1986, Arthur Andersen issued
its opinion concerning the issues earlier identified for
resolution in the October 22, 1986, letter. In rendering its
opinion, Arthur Andersen obtained the opinion of Chamberlain,
Hrdlicka, White, Johnson & Williams (Chamberlain), Tri-Power's
counsel, on certain issues. On the basis of its review of
Chamberlain's opinion and petitioner's representations,22 Arthur
Andersen issued a favorable opinion relating to the acquisition
of Tri-Power, its prior activities, and the future use of its
NOL's.23
During the weeks leading up to the acquisition, petitioner's
management had regular discussions with Arthur Andersen
concerning its investigation of Tri-Power and its NOL's.
Finally, sometime prior to the November 1986 acquisition of Tri-
22 Petitioner represented to Arthur Andersen that its principal
purposes for acquiring Tri-Power were to diversify geographically
its oil and gas operations, enter a new market area, create a
holding company structure, and acquire oil and gas reserves and
leases at an attractive price.
23 Accompanying that opinion was a copy of the Chamberlain
opinion, concerning the tax consequences of various acquisitions
and reorganizations of Tri-Power's predecessors, reviewed by
Arthur Andersen; and three internal memoranda concerning the
remaining issues addressed by Arthur Andersen.
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