Gustafson's Dairy, Inc. - Page 7

          B.   Dairy Operations                                                       
               1.   Milk Production and Processing                                    
               Petitioner operates a dairy farm that produces raw milk.               
          During the years in issue, petitioner's dairy herd was one of the           
          largest in the United States at one location.  Petitioner also              
          operates a dairy processing plant that produces finished dairy              
          products and a milk distribution business.  Petitioner's dairy              
          farm and milk processing plant border the southern city limits of           
          Green Cove Springs.  Petitioner's operations have gradually                 
          shifted over the years, including the years at issue, from milk             
          producing to milk processing.  Petitioner also owns and manages a           
          beef herd, grows timber, and raises crops.                                  
               Petitioner has an open herd rather than a closed herd.  In             
          an open herd, replacement cows are bought from third parties.  In           
          a closed herd, replacements are raised from calves on the farm.             
          Petitioner had in inventory and bought the following number of              
          cows from fiscal year 1983 to fiscal year 1993:                             

                                     Dairy               Dairy                        
                  Fiscal year   cattle inventory   cattle purchased                   
                     1983            7,585           not available                    
                     1984            6,770           not available                    
                     1985            5,920               1,458                        
                     1986            6,100               2,863                        
                     1987            6,004               2,707                        

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Last modified: May 25, 2011