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its NOL's was prudent business planning. Accordingly, we do not
agree that petitioner's knowledge, investigation, or discussion
of Tri-Power's NOL's leads to the conclusion that petitioner had
a tax avoidance purpose.
Investigation of Tri-Power's Reserves
Respondent next argues that petitioner's investigation of
Tri-Power's reserves was minimal in comparison to its
investigation of Tri-Power's NOL's. To the contrary, we think
that petitioner thoroughly investigated Tri-Power's reserves. As
an initial matter, petitioner's acquisition team reviewed all of
the property information, including the 1986 LAM reserve report,
provided along with TPC's offer. Petitioner then commissioned
LAM to prepare an updated reserve report, rolling forward its
earlier projections to November 1986. In addition, Messrs.
Billings and Wagner traveled to Houston to interview Tri-Power's
personnel and evaluate the reserves. During these visits, Mr.
Billings and Mr. Cassell reviewed, in detail, the geological and
seismic data relating to Tri-Power's reserves and the 1986 LAM
reserve report. Mr. Billings also met with Mr. Martin to review
the Tri-Power reserves included in the 1986 LAM reserve report.
Mr. Wagner met with Tri-Power's landman, Mr. Vandergriff, and
reviewed Tri-Power's land files. In-house geologists and
engineers also reviewed the reserve data. Finally, petitioner
used in-house personnel as well as an outside oil and gas
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