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From August 29, 1984, to March 31, 1988, the members of
petitioner's board of directors were E.S. Gustafson, Pete
Gustafson, and Sherwood Gustafson. E.S. Gustafson and Sherwood
Gustafson were petitioner's only board members in fiscal year
1989.
Sherwood Gustafson's son, E.S. (Eddie) Gustafson III, works
on the farm under the direction of the farm manager. He is a
member of the fourth generation of the Gustafson family working
for petitioner.
Petitioner's stock is wholly owned by descendants or by
spouses of descendants of Agnes and Frank Gustafson, or by trusts
of which members of the Gustafson family are the beneficiaries.
During the years at issue, there were no discordant shareholders.
4. Stock Purchase Agreement
Gustafson family shareholders have kept control of
petitioner by restricting the sale or disposition of petitioner's
stock to outsiders. Beginning in 1984, petitioner held an option
granting it the right to redeem its preferred stock for $1,000
per share if a shareholder transferred his or her stock,
including a transfer when a shareholder died. Under the
agreement, petitioner had 30 years to pay for the redeemed stock.
Petitioner's policy has been to redeem a shareholder's stock
under the stock purchase agreement when he or she dies to provide
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