Oakcross Vineyards, LTD., Dennis D. Groth, Tax Matters Partner - Page 31

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          to accommodate Winery in order to foster a long-term                        
          relationship, petitioner has not established that the deferral of           
          payments for grapes was a practice adopted by parties dealing at            
          arm's length.  Furthermore, the accommodations Vineyards gave               
          Winery went even further, including subordinating Vineyards'                
          claims against Winery to those of its lenders and allowing                  
          Winery's lenders to control the payment of amounts due for grape            
          purchases, interest, and rent to Vineyards.                                 
               Moreover, we note that other factors influenced the                    
          development of the relationship between Vineyards and Winery.               
          The record indicates that, as early as 1982, Mr. Groth intended             
          that Vineyards' grapes would supply Winery's needs and that                 
          Vineyards' relationships with other purchasers were to be                   

          Market Segment Specialization Program study of the wine industry            
          prepared by the Internal Revenue Service that was released in               
          April 1995.  Market Segment Specialization Program--The Wine                
          Industry, TPDS 83919Y, reprinted in 37 Tax Analysts Daily Tax               
          Highlights and Documents, at 1971-1989 (May 9, 1995).  Petitioner           
          relies on certain statements in the study to support the                    
          contention that the payment arrangements between Vineyards and              
          Winery were widespread in the wine industry.  Although petitioner           
          relies on the study to show facts concerning the practices of the           
          wine industry, the study is not otherwise in the record, nor does           
          petitioner attempt to establish that it is admissible in                    
          evidence, and respondent has not had an opportunity to object to            
          its admission.  Petitioner claims that the study has probative              
          value; however, the study, which was released in 1995, does not             
          necessarily reflect the practices of the wine industry in 1990,             
          the year in issue.  Moreover, the study also states, in a portion           
          not relied on by petitioner, that deferred payment practices,               
          which the study indicates occur only between related parties,               
          distort the income of vineyards using the cash method.  Id. at              
          1980.  Accordingly, we shall disregard the study cited by                   

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