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manager of Oak Hill. Ellering owned a bowling alley; he knew
nothing about dairy farming.5
Petitioners had no official titles or offices in Oak Hill,
Armageddon, or Parnell. Initially, petitioners received all 100
trust shares in Oak Hill and Pleasant Acres. On December 21,
1983, petitioners surrendered their original 100 shares in Oak
Hill, each receiving 20 new shares. The remaining 60 shares
purportedly were transferred to BBCA, Inc. (BBCA), an
organization purporting to be a church.6 The president of BBCA
was Joan Noske.
During the years at issue, petitioners’ day-to-day farming
operation, including the parts business, was run by petitioners
and their sons Gerard and Ryan, who received no wages for their
labors. All the gross receipts from petitioners’ farming
5 In September 1995, Ellering was convicted by a jury in the
U.S. District Court for the District of Minnesota of conspiracy
to defraud the United States by impeding the Internal Revenue
Service. His conviction was based on his participation with
James and Joan Noske and Imelda Spaeth in a scheme to assist
clients of the Noskes, who sought to reduce or avoid Federal
income taxes, form business trusts that named Armageddon and
Parnell as trustees.
After Ellering’s criminal conviction, petitioners’ son
Gerard became president of Armageddon and Parnell.
6 The minutes of a special meeting of the Oak Hill trustees,
dated Dec. 21, 1983, and signed by Inman and Foshaug, recite that
these transfers were made upon application of the petitioners and
were unanimously approved by the trustees.
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