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The Schmidts raise corn and operate a dairy on the Schmidt
farm. In the dairy operation, cows are milked twice daily. In
addition, the cows are bred once a year (usually in the winter).
When the cows are calving (especially with first-time calving
heifers), they must be checked at least every 4 hours, usually on
a 24-hour basis.
In addition to the Schmidt farm, Mr. Schmidt individually
owns 80 additional acres which he acquired in 1987. The 80 acres
are farmed by Mr. Schmidt as a sole proprietor.
B. Hillside Dairy
On January 7, 1993, Hillside Dairy was incorporated under
the laws of the State of South Dakota.3 Hillside Dairy was
organized primarily to raise grain and operate a dairy.
The Schmidts have been the sole shareholders, officers, and
directors of Hillside Dairy since its incorporation. Mr. Schmidt
has been president, treasurer, and a director, and Mrs. Schmidt
has been vice president, secretary, and a director, of Hillside
Dairy.
Article IV, section 10, of the bylaws of Hillside Dairy
provides:
SECTION 10. Repayment of Disallowed Expenses.
Any expense paid by the Corporation which is finally
determined as a personal expense of any officer or
employee and disallowed as Corporation expense shall be
3Douglas Bleeker, counsel for petitioners, prepared the
articles of incorporation, bylaws, minutes of meetings, and other
corporate documents for Hillside Dairy.
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Last modified: May 25, 2011