Oakcross Vineyards, LTD., Dennis D. Groth, Tax Matters Partner - Page 4

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          Groths decided to enter the winery business.  Accordingly, during           
          that year, they established, pursuant to California law, Groth              
          Vineyards and Winery (Winery), an S corporation.  Winery is                 
          engaged in the business of making and marketing wines, such as              
          cabernet sauvignon, chardonnay, and sauvignon blanc, which are              
          named for the varietal or type of grape from which each is made.            
          Since it started business, Winery has used the accrual method of            
               Initially, the Groths owned all of the outstanding shares of           
          Winery's stock.  In 1982, the Groths employed a professional                
          winemaker, Nils Venge, as general manager of Winery.  During                
          1990, Mr. Venge was responsible for all production operations of            
          Winery and for supervision of Vineyards' vineyard manager.1  Mr.            
          Venge's employment contract provided for options to acquire up to           
          10 percent of Winery's stock, which he exercised as they became             
          available.  During each of the following years, Mr. Venge held              
          the following percentage of Winery's stock:                                 
                    Year                     Percentage                               
                    1985                     1.07                                     
                    1986                     2.71                                     
                    1987                     6.28                                     
                    1988                     8.85                                     
                    1989                     10.00                                    
                    1990                     10.00                                    

          1    In general, a winemaker decides when to pick grapes and must           
          be satisfied with the viticultural practices of the vineyard                
          supplying grapes.                                                           

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