Dennis O. Fultz and Linda G. Fultz - Page 3

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          years at issue, petitioners owned approximately 470 acres of farm           
          land which they leased to Fultz Farms.  Fultz Farms was involved            
          in growing crops, such as corn and soybeans, and hog farming.               
          The corn and grain grown on the farm also provided feed for                 
          livestock.  During the years in issue, Mr. Fultz was president of           
          Fultz Farms, and Eric Fultz, Mr. Fultz’s brother, was vice                  
          president, secretary, and treasurer of Fultz Farms.3   Mr. Fultz            
          and Eric Fultz were also directors.  During 1993, 1994, and 1995,           
          Mr. Fultz owned 33 percent of Fultz Farms.                                  
          2.  Minnesota Corn Processors                                               
               In approximately 1982, Minnesota Corn Processors (MCP), an             
          agricultural cooperative, was formed under the laws of the State            
          of Minnesota, by a group of Minnesota farmers.                              
               MCP’s goal was to collectively provide a corn processing               
          capability to its members and to realize profits for the members            
          based upon the increased values of that processed corn.  Had MCP            
          not been created, petitioners and other farmers would have been             
          limited to selling their corn as raw corn, and the processing               
          profits would have been realized by others.                                 
               MCP’s articles of incorporation authorized it to issue                 
          30,000 shares of common stock at $50 per share and 100,000 shares           
          of nonvoting preferred stock at $50 per share.  The shares of               

               3Bernard Fultz resigned as vice president of Fultz Farms in            
          January 1992 and as a director of Fultz Farms sometime between              
          January 1993 and January 1994.                                              





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