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general partner a total of almost 100 cattle-breeding
partnerships.
Several of these earlier cattle-breeding partnerships,
including DF #1, were the subject of this Court’s opinion in
Bales v. Commissioner, T.C. Memo. 1989-568, wherein the years in
issue generally were 1977, 1978, and 1979. The Hoyt family
originally through W.J. Hoyt & Sons had sold breeding cows or
heifers to these earlier partnerships for no money down and a
promissory note. In general, the promissory note required a
partnership to pay the stated purchase price for its cattle over
a specified long-term period of 10 years or more. For about the
first 5 years, no principal payments were required from the
partnership but only annual interest payments at a specified
interest rate per annum. Over the remaining years, the
partnership was to pay the note’s full principal amount in equal
annual installments. W.J. Hoyt & Sons was further granted a
security interest in the partnership’s breeding cattle, securing
payment on the partnership’s promissory note. W.J. Hoyt & Sons
and the partnership concurrently also entered into a management
agreement, pursuant to which W.J. Hoyt & Sons obligated itself to
undertake all management with respect to a partnership’s breeding
cattle, pay all expenses, and provide stud bull services, in
exchange for receiving all calves produced and any culled cows
(the sharecrop agreement). The sharecrop agreement further
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