- 31 -
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
7(...continued)
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
petitioner.
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