- 70 -
bona fides of the "recourse promissory notes" the partnerships
issued to Barnes Ranches. In the subsequent breeding value
certificate "transactions", the Barnes family and Mr. Hoyt placed
grossly inflated "prices" on certain breeding value certificates
"held" by a partnership, because the "transaction proceeds" were
only "applied" against the grossly inflated stated purchase price
that partnership previously purportedly agreed to pay for its
"breeding sheep". In actuality, the Barnes family and Mr. Hoyt
never contemplated that each partnership's promissory note would
ever have to be paid by that partnership and its partners on a
genuinely recourse basis.
This conduct of the Barnes family and Mr. Hoyt is indeed
behavior not characteristic of the business world and illustrates
that the Barnes family and Mr. Hoyt were not independent parties
acting at arm's length. Their actions evidence that they
themselves viewed the partnership notes as essentially being
illusory and having no practical economic effect and that the
notes were merely a facade to support the tax benefits that Mr.
Hoyt had promised investors in the partnerships. See Ferrell v.
Commissioner, 90 T.C. 1154, 1186-1190 (1988); see also Hunter v.
Commissioner, T.C. Memo. 1982-126 n.17.
For the foregoing reasons and on the record presented, the
Court concludes that the partnership notes were not valid
indebtedness.
G. Petitioners' Failure To Substantiate OGT 90's Breeding Sheep
In comparison to the evidence they offered concerning
specific individual sheep that the other partnerships, including
Page: Previous 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 NextLast modified: May 25, 2011