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Power, Arthur Andersen made a presentation to petitioner's
management concerning the potential use of Tri-Power's NOL
carryforwards. The potential use of Tri-Power's NOL
carryforwards was also discussed, on at least one occasion, by
petitioner's board. Petitioner's management was aware that
unless the acquisition was made before the end of 1986, pending
legislation, amending section 382, would limit petitioner's
ability to use the NOL's of an acquired corporation.
Sometime during October 1986, Messrs. Billings and Reed
traveled to Canada to meet with TPC's representatives. During
that trip, Wes Ismond, TPC's vice president of finance, revealed
that Tri-Power owed $10 million to the banks, and that the banks
were putting pressure on Tri-Power. On the return trip, Mr. Reed
discovered, while reviewing Tri-Power's balance sheet, the $46.5
million intercompany debt that Tri-Power owed to TPC.
Uncomfortable acquiring Tri-Power with its debt position, Mr.
Reed consulted with Arthur Andersen, which later recommended a
put option.
Subsequently, on November 18, 1986, Tri-Power underwent a
recapitalization, discussed supra, pursuant to which Tri-Power's
debts to the banks and to TPC were eliminated in exchange for the
issuance of Tri-Power preferred stock. The next day, as
discussed infra, petitioner, TPC, Tri-Power, Bonanza, and the
banks entered into a "Stock Purchase and Put Option Agreement",
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