Allen E. Paulson, founder of the Gulfstream Aerospace Corp. whose Brookside Farms became one of North America's most successful racing and breeding entities of the 1980s and 1990s, died Wednesday in California after a lengthy illness. He was 78. Paulson, a member of The Jockey Club, was awarded an Eclipse Award of Merit in 1996 for his contributions to racing. The stable owned by Paulson and his wife, Madeleine, also received Eclipse Awards as leading owner in 1995 and 1996 and Brookside was honored with an Eclipse as leading breeder in 1993. Paulson owned some claiming horses in the 1960s, but began taking a more serious interest in racing in 1982. Since that time, Paulson bred at least 85 stakes winners and raced more than 100 stakes winners. He developed Brookside into a 1,600-acre showplace near Versailles, Ky. and also operated divisions of the farm in California and Florida. The all-time leader in Breeders' Cup championship day money earned, Paulson was also leading North American owner by earnings from 1995-97. Best known among the horses campaigned by the Paulsons was Cigar, the two-time Horse of the Year (1995-96) who tied Citation's modern-day record of 16 consecutive victories and who retired as racing's all-time earner with more than $9.9 million. Other champions raced by the Paulsons included Arazi (in partnership), North American and European champion 2-year-old of 1991; 1989 champion older horse Blushing John; 1992 champion 2-year-old filly Eliza; 1997 champion 3-year-old filly Ajina; 1998 champion older filly or mare Escena; 1986 champion turf female Estrapade; and 1987 champion male grass horse Theatrical. As part of estate planning by the Paulsons, Brookside's Kentucky property was sold earlier this year, with most of the acreage purchased by Gerald Ford's Diamond A Ranch. Ashford Stud, located adjacent to Brookside, purchased 450 acres of the Paulson's farm. The Paulsons retained stallions Theatrical and Jade Hunter, as well as 76 mares they bred this year. In addition to the mares, there are 45 young horses at the Florida farm, which was also sold earlier this year. A Clinton, Iowa native, Paulson began his interest in aviation at an early age. After beginning as a mechanic for TWA in 1941, Paulson served in the Army Air Corps in World War II. He then worked as a test pilot and commercial pilot for TWA and in 1951 he began the first of a series of companies devoted to aircraft modification, maintenance, and design. Paulson founded Gulfstream in 1978 after acquiring manufacturing facilities originally owned by the Grumman Aerospace Corp. An aviator, Paulson and a crew flew Gulfstream IVs on two around-the-world flights during an eight-month period, establishing 35 international records. Paulson's other business interests included oil, casino development, and medical technology. In addition to his wife, who plans to continue in the horse business, Paulson is survived by three sons, Richard, Jim, and Mike, and a stepdaughter, Dominique.