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confirms the fact that petitioner considered the tax consequences
of the acquisition, a fact that petitioner does not deny.
Petitioner's consideration of the tax consequences of the
acquisition, as discussed supra, does not mandate the application
of section 269. See D'Arcy-MacManus & Masius, Inc. v.
Commissioner, 63 T.C. at 451. Moreover, the condition was not
binding. Nothing in the letter of intent would have prevented
petitioner from waiving the condition and going forward with the
acquisition in the event that it received an unfavorable tax
opinion but still desired to acquire Tri-Power.
Respondent further contends that petitioner's failure to
include in its letter of intent a similar escape clause allowing
it to back out of the acquisition if the reserves did not measure
up is clear evidence that tax considerations predominated. We
disagree. Petitioner was in the oil and gas business, not the
tax business. Accordingly, it was not only necessary, but
prudent, for petitioner to seek an outside opinion concerning the
tax aspects of the acquisition. An outside opinion concerning
the reserves was unnecessary because petitioner's acquisition
team, through its own investigation, was already familiar with
the 1986 LAM reserve reports and their limitations. Accordingly,
we find that the absence of an escape clause concerning the
reserves does not evince a tax avoidance purpose.
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