Oakcross Vineyards, LTD., Dennis D. Groth, Tax Matters Partner - Page 26

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          amount due 30 days after delivery and 50 percent during January             
          of the following calendar year.  Other sales agreements that were           
          written on unrelated purchasers' letterheads provided for payment           
          of the sale price at similar times, usually determined with                 
          reference to the time grapes were delivered.  Certain of those              
          agreements provided for payment of a portion of the price, at the           
          latest, during the calendar year following delivery.  Generally,            
          unrelated buyers made their final payment for grapes purchased              
          during either the year of purchase or the first quarter of the              
          following calendar year.  Vineyards collected interest from                 
          unrelated buyers on overdue amounts.                                        
               Similarly, Winery's agreements for the purchase of grapes              
          from unrelated growers provide that 50 percent of the purchase              
          price was to be paid 30 days after delivery and the remainder by            
          December 15 of the year of delivery.  We consider the foregoing             
          payment arrangements to be the result of arm's-length bargaining            
          between unrelated buyers and sellers.                                       
               In contrast, Vineyards allowed Winery more liberal payment             
          terms.  During 1982 and 1983, Winery purchased grapes from                  
          Vineyards, but did not pay for them because the cash to do so was           
          not available.  Vineyards also allowed, or acquiesced in, the               
          control by Winery's lenders of the payment of amounts due                   
          Vineyards.  Vineyards agreed to subordinate its claims against              
          Winery to those of Bank of America and later to Napa National               
          Bank, but unrelated sellers of grapes to Winery did not.  Winery            

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Last modified: May 25, 2011