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acreage, 1,099 acres were not used in Korbel’s business
activities, and, on the valuation date, such land had a value of
$2,000 an acre.
In January 1986, Korbel elected to become an S corporation
(within the meaning of section 1361(a)(1)). That election was in
effect on the valuation date. Korbel’s financial statements and
tax returns are prepared on a calendar-year basis.
Distribution Agreement Between Korbel and Brown-Forman Corp.
In 1965, Korbel signed a marketing agreement with Jack
Daniel Distillery, Lem Motlow, Prop., Inc. (Jack Daniel),
granting Jack Daniel worldwide rights to buy, sell, and
distribute all Korbel beverage products. Thereafter, Jack Daniel
was consolidated into Brown-Forman Corp. (Brown-Forman), and, in
1987, Brown-Forman contracted to be the exclusive distributor of
Korbel products.
In 1991, Korbel and Brown-Forman entered into a new
distribution agreement (the agreement or the Brown-Forman
agreement), effective through April 30, 2003, automatically
renewable on a year-to-year basis thereafter, and cancelable on
or after May 1, 1998, upon 5 years’ written notice by either
party to the other of its intent to cancel. The agreement
granted to Brown-Forman the U.S. distribution rights for Korbel’s
champagne and brandy products, except for Korbel’s right to sell
through its on-premises wine shop. The agreement was amended in
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Last modified: May 25, 2011