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Hillside Dairy was to receive all of the gross proceeds from the
sales of crops grown on the farm, as well as all payments
received under Federal conservation programs (or any other
Federal, State, or local governmental programs). Hillside Dairy
supplied all of the fertilizer, chemicals, and seed necessary to
plant and treat the crops.5
Mr. Schmidt agreed (1) to farm the land; (2) to protect the
crops from injury and waste; (3) to till the land after
harvesting the crops; and (4) to rotate the crops from year to
year. Hillside Dairy agreed to furnish all tools, farm
implements, machinery, and hired help necessary to cultivate and
manage the farm. Hillside Dairy agreed to furnish all necessary
materials, and the Schmidts agreed to supply all necessary labor,
to maintain all fences and other improvements.
Mr. Schmidt was permitted to use the corporation’s combine
and tractor on the land he owned individually. He also had use
of one of the pastures.
D. Mr. Schmidt’s Separate Farming Activity
During the years at issue, Mr. Schmidt individually (and not
as an employee of Hillside Dairy) farmed land that was not owned
by Hillside Dairy. He kept his personal grain separate from that
5Although a contradictory provision required Mr. Schmidt to
“provide all seed, labor, and other expenses of producing,
harvesting, and marketing crops”, Hillside Dairy in fact paid all
those expenses and deducted the costs in computing its income.
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Last modified: May 25, 2011