Poison Creek Ranches #1, Ltd., Poison Creek Ranches #2, Ltd., Poison Creek Ranches #3, Ltd., Poison Creek Ranches #4, Ltd., Walter J. Hoyt, III, Tax Matters Partner, et al. - Page 18

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          record do not show that the partnerships made payment on the                
          notes with cattle other than those with a zero basis as                     
          stipulated.  Accordingly, the partnerships must recognize                   
          ordinary income in the amounts of the payments of interest and              
          principal on the notes.                                                     
               Petitioner's argument concerning the terms of the agreement            
          and stipulation is not entirely clear, and we will briefly                  
          address the alternate argument we believe petitioner may be                 
          attempting to make.  The argument can be summarized as follows:             
          The agreement sets out the number of cattle subject to                      
          depreciation on an annual basis; as stated in the petition, the             
          partnerships sold registered shorthorn heifers which had been               
          held for breeding purposes for over 24 months in payment of the             
          notes; these cattle would be depreciable; because the number of             
          cattle subject to depreciation does not decrease in correlation             
          to the cattle transferred in payment on the notes, the agreement            
          does not provide the partnerships with sufficient cattle to make            
          such payments.  Therefore, the payments could not have been made            
          under the binding terms of the agreement.                                   
               We are not persuaded by this argument.  Even if the cattle             
          transferred were depreciable, registered shorthorn heifers,                 
          petitioner has stipulated that the cattle had zero basis, and as            
          explained above, we will not set aside this stipulation.                    
          Therefore, the cattle would be fully depreciated and outside of             





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