Durham Farms #1 - Page 7




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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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