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subordinated to its relationship with Winery. Also, Winery's
control of Vineyards' viticultural practices entitled it to use
the term "estate bottled" to describe its wines. Consequently,
the evidence supports an inference that a long-term relationship
between Vineyards and Winery could have been established even
without Vineyards' generous payment terms.
Because the dealings between Vineyards and Winery are at
variance with the practices of unrelated parties with similar
objectives dealing at arm's length, we are not prepared to accept
that they occurred in the ordinary course of Vineyards' business
or were actuated by the business purposes claimed for them.
Petitioner has pointed to no nontax benefit received by Vineyards
from Winery commensurate with the substantial concessions and
accommodations made by Vineyards for Winery's benefit. Moreover,
petitioner has not shown that Vineyards could not have sold, as
it did in 1981, all of its grapes to third parties at market
value on terms that did not entail the same period of deferral as
its sales to Winery. To the contrary, it appears to us that
Vineyards was able to sell to unrelated buyers all of the grapes
that Winery did not require without such a deferral of payment of
the purchase price.8 Accordingly, we conclude that petitioner
has not established that there was a legitimate business purpose
8 Mr. Groth testified that he had significant experience
selling Vineyards' grapes to unrelated parties.
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