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obligated W.J. Hoyt & Sons to replace any partnership breeding
cow that could no longer serve as a breeding cow with another cow
of a specified quality. In addition, W.J. Hoyt & Sons further
guaranteed that there would be a 10-percent annual increase in
the size of the partnership’s breeding herd.
Most of the cattle sold to these earlier partnerships were
represented to be registered Shorthorn heifers on the bills of
sale issued to the partnership. Others were appendix registered
and/or crossbred. Some were “grade” heifers. All of the cattle
owned by the partnerships registered with the American Shorthorn
Association (ASA) were registered under the W.J. Hoyt & Sons
name, and not under a partnership’s name. However, other of the
Shorthorn cattle sold to the partnerships were not registered
with the ASA. Instead, these cattle were issued certificates by
the Hoyt family (Hoyt certificates).
As indicated previously, the Hoyt family through W.J. Hoyt &
Sons originally had (1) sold the breeding cattle to earlier
cattle-breeding partnerships they formed and promoted to
investors and (2) managed those partnerships’ breeding cattle
pursuant to a sharecrop agreement with each partnership. These
arrangements somewhat changed over the years, in that the Hoyt
family conducted these activities through various entities.5 At
5In Bales v. Commissioner, T.C. Memo. 1989-568 (wherein the
years in issue generally were 1977 through 1979), this Court,
(continued...)
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