Durham Farms #1 - Page 12




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          during the period from 1987 through 1992.  The record in the                
          instant cases reflects that many of the documents, records, and             
          tax returns the Hoyt organization prepared relating to its                  
          transactions with the cattle-breeding partnerships it formed are            
          inaccurate and unreliable.                                                  
               For instance, the cattle-breeding partnerships the Hoyt                
          organization formed in 1983, 1984, 1985, and 1986 had no                    
          specific breeding cattle assigned to them even as of 1987.6  This           
          is reflected in a report the Hoyt organization prepared with                
          respect to the 1986 operating results of cattle-breeding                    
          partnerships it had formed.  This report, dated December 31,                
          1986, states that no operating results were reported on cattle-             
          breeding partnerships formed in 1983, 1984, 1985, and 1986                  
          because those partnerships were still “in the process of forming            
          their breeding herds * * * [in a selection process] which                   


               6Each of the breeding cattle a partnership acquired was                
          supposed to be listed and identified in the bill of sale Ranches            
          issued that partnership.  According to Jay Hoyt, the Hoyt                   
          organization’s original practice had been to attach copies of all           
          the animals’ registration certificates to the bill of sale.  He             
          further indicated that after the Hoyt organization’s cattle                 
          records were computerized around 1985, a Schedule A containing              
          all of this same information (including each individual animal’s            
          tag number, registration number, birth date, and sex, as well as            
          the respective registration numbers of its sire and dam) was                
          instead prepared and attached to the bill of sale.  In addition,            
          although the sharecrop agreement that Management and a cattle-              
          breeding partnership entered typically recognized that any                  
          registration papers on a partnership’s breeding cattle would be             
          taken out in the Hoyt family’s name, the sharecrop agreement                
          required Management to know the identity and number of a                    
          partnership’s breeding cattle at all times.                                 





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