Discover how Section 46 transformed dairy investments and revitalized rural economies. Curious about the hidden gold rush that reshaped the dairy industry? Read on.

Few legislative actions have transformed agriculture as profoundly as Section 46 of the Internal Revenue Code. Enacted quietly in 1968, this amendment revolutionized the dairy cattle breeding industry, unlocking economic opportunities for savvy investors. Section 46 became a financial key to a realm of economic potential. 

Once-abandoned dairy farms sprang back to life. New barns emerged, and rural economies thrived with significant urban investment seeking tax shelters. This legislation ignited a fierce competition among breeding operations for affluent investors’ dollars. 

Investment elevated dairy breeding standards. Successful firms, marked by Grand Championships and superior breeds, attracted capital. The ripple effects revitalized local economies, spreading financial benefits across rural communities. The era of Section 46 stands as a dynamic period in dairy cattle breeding history.

Section 46: The Unintended Catalyst Transforming Dairy Breeding 

Section 46 of the Internal Revenue Code did not improve dairy cattle or change breeding patterns. It was a tax shelter for wealthy taxpayers but injected money into the rural economy. The legislation introduced the investment purchase credit, a tax write-off that let taxpayers offset the costs of investment in livestock against personal income. Participants could buy a beef or dairy animal with a nominal down payment and a promissory note to pay the balance over three years. 

Accountants and lawyers, mostly from New York City, quickly seized this opportunity. They bought and rehabilitated abandoned dairy farms, building barns, fences, and pastures. They then bought Holsteins and created breeding programs. The competition for investor dollars was intense, making investment firms’ track records critically important. Prices for top-tier Holsteins, especially those with show ring capabilities, skyrocketed. 

The activity stimulated by Section 46 was overwhelmingly positive. The substantial sums paid to farmers trickled down to farm equipment dealers, feed mills, car vendors, and appliance shops, creating new prosperity for rural communities. Every million dollars invested generated even more.  Section 46 catalyzed the most significant economic activity in Holstein’s history. 

From Humble Beginnings to Industry Leadership: The Remarkable Rise of John Sullivan and Ledgefield Associates 

By 1974, Ledgefield Associates had made a significant impact as major buyers in the dairy cattle market, purchasing top-tier cattle across the United States and Canada. Their headquarters was at Glenn Tripp’s Farm, a mile west of Batavia, New York. 

John Sullivan was a pivotal figure behind both Erinwood Farms and Ledgefield Associates. Based in Pavilion, New York, Sullivan owned Sullivan-owned Agri-Systems and Erinwood Holsteins and held a stake in Ledgefield Associates. 

Sullivan’s journey began on his family farm in Holcomb, New York. He pursued animal husbandry and agricultural economics at Cornell University, graduating in 1962. He excelled in intercollegiate judging contests, securing two wins in New York. After graduation, he worked at First Trust and Deposit Company in Syracuse, rising to assistant manager in the farm loan department. 1965, he left to establish Agri-Systems Inc., eventually becoming a national sales leader by 1974. 

His foray into Holsteins began in 1961; by 1968, he had purchased his first Holstein. He continued to build his Erinwood herd, culminating in the Erinwood-Trippacres sale in 1973, where 66 head averaged $2,074.00. Sullivan learned that showing cows without pedigrees was a poor investment, so he required each cow’s dam to be Excellent or have several generations of Very good. 

In 1972, Sullivan and Stuart Hutchins of Paris, Ontario, bought Wintercrest Sunlea for $20,000.00. By May 1973, Sullivan purchased Hutchins’ 40-head herd, averaging $6,000.00 per head. Erinwood/Leadfield relocated their herd to a new barn in LeRoy, New York, in 1974, making significant acquisitions, including the prestigious Craigo family from Skagvale Farms. 

The Erinwood team owned numerous notable Holsteins in the mid-1970s, including the high-priced Glamour cow, purchased for $74,000.00 and sold pregnant to Osborndale Ivanhoe. Her calf, Allendairy Glamourous Ivy, became a noteworthy addition to the herd. 

The Erinwood organization held two Royal Erinwood Sales, with the inaugural sale in 1975 setting a record average of $19,304.00 per head. The top animal, Erinwood Pre Eminent, sold for $110,000.00. With his Irish charm and promotional skills, John Sullivan expertly orchestrated these events. 

At the 1976 sale, Hillranch Fond Matt Jean fetched $48,000.00, purchased by George Morgan. One notable sale included a half-interest in Cass-Ridge Jewel Pat and 11 offspring for $275,000.00. 

Md-Maple Lawn Marquis Glamour and her famed daughter Ivy significantly impacted the breed. Ivy’s son, Leadfield Columbus, became the highest P.D.M. bull in 1983. Another prominent bull from Erinwood, Leadfield Prestar, sired multiple champions, including Hanson Prestar Monalisa, a Central National grand champion. 

Erinwood and Sullivan left an enduring legacy on the dairy cattle industry, driven by strategic investments and unparalleled expertise in Holstein breeding.

Dreamstreet Holsteins: Revolutionizing Dairy Breeding with Unmatched Quality and Vision 

The first investor program exploiting Section 46 was initiated by Arthur Pulitzer, an accountant from Suffern, New York, who stationed his cattle at a Cherry Valley farm. After a successful trial, Pulitzer shared his idea with fellow C.P.A.s Jerry Bernstein and Robert Friedman. 

Seeking expertise, Bernstein contacted Leonard Baird, then president of the New York State Holstein Association, who recommended Peter Heffering. Co-owning the renowned Hanover Hill herd in Amenia, New York, Heffering became a key figure. In August 1972, Bernstein and Friedman visited Heffering and proposed a joint venture. 

Though interested, Heffering had a herd dispersal sale imminent, so Bernstein and Friedman returned to New York City. Subsequently, Heffering learned that Jim Repard, a cautious Holstein trader, had declined Bernstein and Friedman’s offer. Heffering then approached Bernstein again. 

By 1974, Bernstein, Friedman, and Heffering launched a pilot project with twelve investor programs, each involving two Hanover Hill cows. Despite the success, the Black Watch Angus Farm scandal, with its fraudulent livestock investments, cast a shadow. Nevertheless, it did not hinder their growth. 

Dreamstreet Holsteins, Inc., founded by George Morgan, epitomized the investor era. Morgan, a savvy urbanite passionate about Holsteins, transformed the industry. Growing up in Scotch Plains, NJ, with a C.P.A. father and an uncle managing a dairy farm, Morgan spent his childhood surrounded by Holsteins. 

Morgan studied English at Rutgers University and worked on a dairy farm to support his family. Leaving school in 1960, he worked as a herdsman in Bel Air, MD. Soon, he struck out on his own with Osborndale Ivanhoe calves in Warwick, NY, forming a close bond with Albert Buckbee, an expert in dairy cattle. 

In 1965, Morgan bought a farm in Walton, NY. Despite heavy debts, he balanced dairy farming and raising five children, eventually entering the real estate industry in 1969. Within four years, he earned over a million dollars in commissions, selling rural properties to urbanites. 

Despite real estate success, Morgan’s love for Holsteins persisted. The 1973 oil crisis reduced his sales, giving him time to delve into U.S. tax laws like the livestock investment credit. He realized investors could buy cows, receive tax rebates, and benefit from depreciation. Morgan leveraged these insights, forming his first investor group in 1972. 

By 1975, Dreamstreet was a significant player, notably spending $104,800 at the Royal Erinwood Sale. Partnering with C.P.A. George Teichner, they attracted New York City businessmen as clients, forming Dreamstreet Holsteins, Inc. Morgan’s model grouped six farms into “satellites” managed by dedicated teams, expanding to manage 1,200 cows on 18 farms by 1979. 

Internal issues soon surfaced. Morgan and Teichner, both strong personalities, clashed over business direction, particularly non-farming ventures like an ultrasound rat repellent system and machinery dealership advocated by Frank Wood. To resolve these, Morgan and Wood secured a loan to buy out Teichner’s shares. Subsequently, George and Linda Morgan established the “Tyrbach” prefix, naming it after Morgan’s ancestral Welsh farm. Tyrbach comprised three adjoining farms in Walton, covering 500 acres, founded on Puget-Sound cattle bought in 1976.

Mr. and Mrs. George Morgan operated their Holstein herd continuously until March 2008, when they decided to disperse it. Unlike Hanover Hill Farm in Ontario, Dreamstreet often moved animals to maximize investor profits. 

George Morgan excelled with Round Oak Apple Elevation daughters, breeding over 40 Excellent-rated Elevations. Dreamstreet Rorae Pocohontis (EX-93) sold for $530,000 in the 1983 Designer Fashion Sale, establishing an exceptional lineage. 

At Trybach Farm, Morgan bred Trybach Elevation Twinkie (EX-97), the first cow to win grand championships at three National Shows and the Royal Winter Fair in 1986. Twinkie’s dam, Briggskill Hostess Twinkle (VG-87), came from the Briggskill herd, bought by Morgan for an average of $1,000 per cow. After selling Dreamstreet in 1979, Morgan retained Twinkle and bred her to Elevation, resulting in Twinkie in December 1981. 

Twinkie was nominated for All-American honors as a calf in 1982 and was sold for $10,000. Morgan saw Twinkie’s potential and, after securing a $60,000 loan, partnered with Peter Heffering to purchase her for $47,000. A year later, Twinkie achieved grand champion status at all three U.S. National Shows in the same year; Hanover Hill subsequently bought Morgan’s interest in 1983. 

Another notable cow was Mity-Fine Matt Misty (EX), part of two Reserve All-Americans gets by No-Na-Me Fond Matt. Morgan acquired Misty as a 4-year-old in 1975 for $25,000 and sold her two months later to Edwin R. Gould and Bryce Metcalf. Misty eventually produced G-Metcaif Valiant Mist (EX-2E-94), valued at around a million dollars. 

Morgan was always ready to sell a cow for $100,000, famously saying, “God makes cows every day.” 

John Lennon’s investment in Dreamstreet led to the purchase of Spring Farm Fond Rose for $56,000, later sold for $250,000 in the 1980 Summer Dreams by Dreamstreet Sale. 

In 1976, Frank Wood, an Albany tax attorney, joined Morgan and Teichner to plan a Holstein export business. By October 1979, Morgan sold his stake in Dreamstreet to Wood, who became the new president, with James Bell following in leadership. 

Under Wood, Dreamstreet thrived, purchasing top-tier show cows and entire herds with prices reaching the quarter-million-dollar range. In the early 1980s, Dreamstreet boasted one of North America’s premier show herds, which washighlighted in 1983 when they showcased grand and reserve grand champions at the Central National Show. 

Dreamstreet’s roster included champions like Milleroale Ultimate Rosalynn (EX), Campbell-Hollow Ultimate Kate (EX), and Howard-Home Valiant Eva (EX). Among their prized cows was Kriegeroue PB Cosima, a Bootmaker daughter whose son, Dreamstreet Commander, became Italy’s most used Holstein bull of 1989. 

A notable acquisition was the Agro Acres herd from Hamilton, Ontario. Frank Wood discussed the potential investment with Glenn Tripp, leading to a purchase just above $1 million, including the illustrious Sheffield Climax Pansy (EX) family. 

Dreamstreet’s headquarters was a modest white cottage in Walton, where influential figures like Frank Wood and Buddy Fleming conducted business. Fleming, originally a cattle clipper, had rapidly ascended to Vice-President of cattle operations.

Throughout this period, unsettling rumors about Dreamstreet’s financial instability and an I.R.S. investigation emerged. The artificial insemination industry exhibited scant interest in Dreamstreet’s bulls; they found it challenging to sell females and lacked a robust heifer-raising program—a critical issue since heifers represent the primary income source in this sector. Allegedly, calves were even dying in the hutches. 

Customers such as Sites, Brophy, and Sands, who had acquired cattle from Dreamstreet, chose to leave and initiate their operations, further underscoring the issues at Dreamstreet. 

Ultimately, while the I.R.S. exonerated Dreamstreet, public scrutiny precipitated tax code changes that abolished many tax shelters. Dreamstreet attempted a pivot by venturing into the foreign embryo market. Still, the 1987 stock market crash drove the enterprise into receivership. 

By 1989, a new entity, New Dreamstreet Corporation, had emerged. However, in May 1990, 4,000 heads of the former Dreamstreet herd were sold to Masstock Montezuma, Inc., signaling the definitive end of Dreamstreet. 

An era had indeed concluded; Dreamstreet indeed possessed some extraordinary cows.

The Evolution of Hilltop-Hanover Farm: From Guernseys to Elite Holsteins

The Hilltop-Hanover Farm at Yorktown Heights, N.Y., was once home to the Hanover Hill Guernsey herd, managed by Dave Younger and owned by Henry Christal, who also had a Holstein farm in Amenia, N.Y. In 1968, Peter Heffering and Ken Trevena rented the Amenia farm. They developed the first Hanover Hill Holstein herd, with Christal’s permission to use the Hanover Hill name. 

When a Wall Street group purchased the Yorktown Heights farm from the Christal estate, they named it Hilltop-Hanover and engaged Younger as manager in 1975. Younger, born on September 23, 1917, in Nebraska, had previously managed draft horses and worked for Mrs. Max Dreyfuss, who introduced him to dairy farming during WWII. In 1945, he helped Christal set up Hanover Hill Guernseys, quickly turning it into a recognized herd. 

1969, with Christal’s encouragement and financial assistance, Younger and Heffering started Hanover Hill Sales & Service. This influential sales management business succeeded significantly with its Designer Fashion Sales series. The first sale in 1975 introduced Younger to Wall Street stockbrokers, who later partnered to form Hilltop-Hanover Farm in 1977. Younger managed 40 selected cows from Dreamstreet Holsteins’ programs and additional purchases. 

Hilltop-Hanover’s classification in 1977 featured 41 heads averaging 88.7 points and a B.A.A. of 109.8%, including 20 Excellents. The herd included prestigious cows like Burley Bootmaker Valid (EX) and Hillranch Fond Matt Jean (EX). 

By the early 1990s, over 50 Excellent cows had been bred and developed at Hilltop-Hanover. Despite tax changes eliminating the investment credit, the farm continued to thrive. Younger emphasized that investor confidence was maintained by caring for cattle, particularly calves, promoting investor-owned animals, and generating occasional income. 

The Hilltop-Hanover partial dispersal on October 22, 1990, was the highest-grossing Holstein sale of the year, totaling $1,792,450.00 on 180 head. The highest-selling animal was Hilltop-Hanover-B Bellerina, which fetched $210,000.00. The final dispersal on December 9, 1991, in Amery, Wisconsin, totaled $579,925.00 on 77 head, with the high seller, Hilltop-Hanover-B LM Diedra, being sold for $57,000.00 to Larry Jerome of Jerland Holsteins.

The Troubled Legacy of Jack Stookey: Ambition, Success, and Downfall 

He had a lovely mom and dad, hardworking folks from dawn to dusk. Emra and Mary Stookey, their names were. Jack Stookey was the youngest of three sons. Dr. George Stookey, the oldest, graduated from Indiana University, received a master’s in preventive dentistry in 1962, and a doctorate in dental science in 1971. He joined the Indiana University School of Dentistry as an assistant professor in 1964. He was promoted to associate professor in 1973 and full professorship in 1978. As an avid researcher, his primary interests were fluoride pharmacology and the prevention of dental caries. He held at least twenty patents. Dr. Stookey discovered Fluoristan, the substance in toothpaste that prevents cavities. He sold his patent to Procter & Gamble, profiting from royalties. 

At the end of the day, when Jack screwed up, Dr. George stepped in. It had to happen well. In Mary Stookey’s eyes, Jack could do no wrong. He was her golden-haired boy and the candy kid. When his first wife didn’t meet Mary’s expectations, she promoted the dissolution of the marriage. Jack followed Mom, dumped their first wife, and then married Darla. He got it right that time. She straightened him out. When Darla entered the picture, Jack had started to drift. Until then, he had enjoyed a distinguished career. He graduated high school as a track and field star. He won a scholarship to Wayland Baptist University, setting state athletic records. Returning to Leesburg in 1968, he indulged his passion for automobile racing, designing and building his cars and driving them in races. It was a dangerous way to make a living. His mother protested, and Darla put her foot down, telling him to get into something safer and steadier. Jack quit car racing and returned to the home farm, a 1,500-acre showplace built by Emra and Mary, home to a herd of Holsteins, one of the best in the state. By 1980, there were 31 Excellent and 33 Very Good females. 

Emra and Jack sold the herd at its peak. A farm auction averaged $4,381.00 on 124 head, with a top price of $21,000.00 for VT-Pond-View Bootmaker Lassi (EX). Six heads sold for five-figure prices. The dispersal was prompted by Jack’s newfound vision to start an investor herd, assembling the best Holsteins North America had to offer. He quickly entered the investor business, receiving money by the wheelbarrow full. The investment purchase credit appealed to individuals earning $500,000.00 a year and upwards. Around Indianapolis, there were plenty in that category. The Stookey name spread beyond Indiana; soon, investors from California, Florida, and Georgia were sending money. 

The first cow Jack bought was Georgian Quality Pat, one of his best, a significant quality Ultimate daughter who could win at shows. Jack bought other remarkable cows besides Pat, incorporating them into investor packages and promoting them in the show ring. His best year was 1983 when he took home the premier exhibitor banner at the Central National Show and nearly the same at the Eastern and Western Nationals. Attracted to the red and white breed, he bought Continental Scarlet-Red (EX) after she won the grand championship at the Royal Winter Fair in 1982. Scarlet was the only cow to defeat Brookview Tony Charity at the Royal. 

Another special individual was Nandette TT Speckle-Red (EX), the Triple Threat daughter bought from David Brown. Jack could accurately state he owned two of the best red and whites of the 1980s. Other notable cows owned by Jack wore black and white coats, such as Raylore Citamatt Ali, All-American Junior 2-Year-Old, C Til-El Kim Second Sheik, Reserve All-American Senior 2-Year-Old, and C Clarene Citamatt Joan, Reserve All-American 3-Year-Old. 

Then the I.R.S. came calling. They disapproved of cattle investment tax shelters and were auditing many in the early 1980s. There was a target on Jack’s back. The I.R.S. disallowed many of his tax loss claims, demanding six-figure back taxes. This crisis hit as the flow of investor funds slowed, and his herd wasn’t generating much revenue. Incidents painted a dire picture: In winter 1985, unable to pay his help, Jack had his men load a trailer with bull calves—planned to be sold for breeding purposes—and take them to the slaughterhouse, including three sons of Continental Scarlet by Roybrook Telstar. When Jack broke, neighbors Mr. Van Forest and his son, who cared for 80 heifers, also lost their farm. 

A blizzard in 1985 buried 100 Stookey calf hutches in the snow; all the calves suffocated, including 18 by Enhancer out of Scarlet. Rumors surfaced: Jack bought high-priced cows in Canada, stopped at the border when checks bounced, and a disgruntled investor allegedly dynamited his porch. Such scuttlebutt turned Jack into a pariah; legitimate breeders shunned him, some calling him a shyster. An Indiana breeder recalled Jack as “a selling Jesse,” capable of selling anything. 

The I.R.S. filed a lien for back taxes, prompting Jack to file for bankruptcy. The bankruptcy trustee took possession of Jack’s assets, causing legal issues as Jack had only made the first payment on many cattle. Breeders claimed their animals still belonged to them, but the trustee claimed priority over unpaid vendors’ liens. The court upheld the trustee’s claim. 

Dr. G.W. Snider of Goshen, Indiana, settled a sizeable unpaid vet bill by taking Stookey Fagin Scarlet, Scarlet’s Coldsprings Elevation Fagin daughter, the first red and white cow to make 50,000 lbs. of milk and classify 93 points. Lamenting the waste of superior genetics, Louis Prange of Elm Park Farms made a deal with the trustee, taking some cows on a flush program and agreeing to split sale proceeds. One donor was Nandette TT Speckle. Flushed to Blackstar, she produced Stookey Elm PM-K Blackrose. 

Jack’s splash in the investor business lasted about four years, from 1980 to 1984, peaking in 1983-1984. The investment credit provision’s repeal in the Tax Reform Act of 1986 wasn’t Jack’s downfall; it was Jack himself. Convicted of fraud and embezzlement, he served his sentence on weekends. The convictions and bankruptcy ended his business. Jack relocated to Tulsa, Oklahoma, joining a firm that sold U.S. currency to foreign investors. 

Dr. George Stookey saved the family farm, taking their mother, Mary, to live with him. Jack maintained ownership of the Leesburg farm, attempting to sell it to Randy Frasier for his Elmvue herd. Frasier invested $85,000.00 in fixing the farm buildings but learned Jack didn’t have the right to sell it, leaving Indiana frustrated. 

In 2004, an Indiana farm paper reported Jack’s death by suicide. Rumors included involvement with Colombian drug traffickers. To verify, I contacted Glenn Tripp, Jack’s leading man during peak years, who attended the funeral. Tripp revealed that the I.R.S.’s persistent pursuit and a $1.5 million tax arrears claim led Jack to take his life, driving down a back road and shooting himself. 

In the beyond, Jack can take credit for breeding arguably the two best animals from the investor era: Stookey Elm Park Blackrose and Stookey Fagin Scarlet, names well-known in the Holstein community.

The Bottom Line

Section 46 of the Internal Revenue Code revolutionized the dairy industry. Offering a tax shelter attracted wealthy investors and injected funds into rural economies. This led to revitalized farms, updated facilities, and quality livestock, especially Holsteins. The intense competition among investment firms marked this period with unparalleled prosperity and innovation in the dairy sector. Though meant as a financial incentive, the legislation’s secondary effects fostered economic growth and higher standards in dairy farming. The legacy of Section 46 highlights how legislative changes can transform an industry, inspiring contemporary Holstein breeders and dairy farmers.

Key Takeaways:

• Quiet Introduction: Section 46 was enacted without fanfare or widespread attention, largely unacknowledged by the agricultural press and urban populations.
• Targeted Benefits: The legislation primarily served as a tax shelter for wealthy taxpayers, offering significant tax credits for investments in livestock.
• Economic Boost: Despite its primary intent, Section 46 indirectly injected substantial funds into the rural economy, benefiting various sectors including farm equipment dealers and feed mills.
• Opportunity Seized: Financial professionals, particularly in New York City, quickly capitalized on the legislation, creating investment businesses and revitalizing abandoned dairy farms to accommodate investors.
• Intense Competition: The fight for investor dollars led to fierce competition, skyrocketing the prices of elite Holstein cattle with show ring capabilities.

Summary: Section 46 of the Internal Revenue Code, enacted in 1968, revolutionized the dairy cattle breeding industry by providing economic opportunities for investors. The legislation introduced the investment purchase credit, allowing taxpayers to offset the costs of investment in livestock against personal income. This allowed accountants and lawyers from New York City to buy and rehabilitate abandoned dairy farms, build barns, fences, and pastures, and buy Holsteins and create breeding programs. The competition for investor dollars was intense, making investment firms’ track records crucial. The activity stimulated by Section 46 was overwhelmingly positive, with substantial sums paid to farmers trickling down to farm equipment dealers, feed mills, car vendors, and appliance shops, creating new prosperity for rural communities. John Sullivan, a pivotal figure behind Erinwood Farms and Ledgefield Associates, made a significant impact as major buyers in the dairy cattle market, purchasing top-tier cattle across the United States and Canada. Dreamstreet Holsteins, Inc., was founded by George Morgan in 1972, focusing on U.S. tax laws and the livestock investment credit. The Hilltop-Hanover Farm at Yorktown Heights, N.Y., was once home to the Hanover Hill Guernsey herd, managed by Dave Younger and owned by Henry Christal.