- 39 -
future". The notes to the financial statements explained that,
as a result of the acquisition of Tri-Power, petitioner gained
access to "substantial tax loss carryforwards which are available
to reduce future income taxes." The 1986 annual report also
reiterated petitioner's continued commitment to its acquisition
program.
III. Petitioner's Operations After the Acquisition
A. Transfer of Petitioner's Oil and Gas Properties to
Tri-Power
On December 1, 1986, Tri-Power's name was changed to Plains
Petroleum Operating Co. (to avoid confusion, however, we will
continue to refer to Plains Petroleum Operating Co. as Tri-
Power). Also on December 1, 1986, petitioner transferred all of
its oil and gas properties to Tri-Power (the December 1, 1986,
property transfer will sometimes be referred to as the dropdown
and the properties transferred will be referred to as the
dropdown properties).27 Petitioner intended to maintain Tri-
Power as a wholly owned subsidiary, and the dropdown was an
integral part of petitioner's plan to acquire Tri-Power.
For each of the years 1987 through 1996, the Tri-Power
properties produced oil and gas amounting to approximately 5
percent of the production from the dropdown properties during
27 Petitioner used only one operating subsidiary, Tri-Power,
until 1992, when it organized Plains Petroleum Gathering Co.
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