-32-
In Gustafson's Dairy, Inc. v. Commissioner, T.C. Memo. 1995-
11, we held that the burden of proof is on respondent for ground
(d) for 1987 and 1988, and for the first $550,000 for 1989, and
for ground (e) to the extent of petitioner's purchase of the
Union Camp property for $2,249,625. The burden of proof is on
petitioner as to whether it permitted its earnings and profits to
accumulate beyond the reasonable needs of its business for all
other grounds, and whether it was formed or availed of to avoid
shareholder level taxation. Gustafson's Dairy, Inc. v.
Commissioner, supra.
B. Whether Petitioner Was Formed or Availed of To Avoid
Shareholder Level Taxation
1. Whether Petitioner Intended To Avoid Shareholder Level
Taxes
E.S. Gustafson and Sherwood Gustafson thought that
petitioner would have difficulty surviving in competition with
large corporate milk producers. They knew that many dairy
farmers in northern Florida had gone out of business before or
during the years at issue. They were concerned that petitioner
might lose the Winn-Dixie account. They wanted petitioner to be
able to redeem the stock of Pete Gustafson when he died. They
wanted petitioner to be free of debt.
By the time of the years at issue, Sherwood Gustafson had
worked for petitioner for 25-27 years, his entire adult life. He
felt responsible for the continued survival of the business. His
lifelong commitment to running the dairy gave him a strong sense
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