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three children are limited partners of Vineyards and own the
remainder of Vineyards, each trust holding a 5-percent interest.
Vineyards is engaged in the business of growing wine grapes
and is a farmer for purposes of the Code. Vineyards jointly
operates two vineyards: the Oakcross Vineyard, a 121-acre parcel
acquired during 1981 for $2,180,000, and the Hillview Vineyard,
acquired during 1982 for $975,000. Vineyards made downpayments
of $400,000 and $250,000, respectively, for each parcel and
financed the remainder of their purchase prices with mortgage
debt. Vineyards borrowed $301,115 from the Production Credit
Association (PCA) for the purchase of the Hillview Vineyard.
Since it started business, Vineyards has used the cash receipts
and disbursements method of accounting.
Vineyards' operations were initially financed by cash
contributions from the Groths, mortgage debt, and annual
operating loans. Vineyards obtained operating or crop loans from
the PCA during each of the years 1981 through 1988. The loans
were repaid each year. During 1988, Vineyards obtained a
$300,000 line of credit from Napa National Bank.
During 1990, Vineyards employed, inter alia, a vineyard
manager and two assistants. Prior to and during 1990, Vineyards
maintained an office in a building on the Hillview Vineyard.
Winery
During 1982, having learned that operating a winery offered
greater potential for profit than operating a vineyard, the
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Last modified: May 25, 2011