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were to receive back “other cows”.9
The numbers of cattle owned by the cattle-breeding
partnerships reflected in Management’s financial statements for
its fiscal years ended September 30, 1989 and 1990, were not
based upon cattle Management was actually managing. Jay Hoyt had
assigned the preparation of Management’s 1989 and 1990 fiscal
year financial statements to another individual working in the
Hoyt organization. From about the fall of 1989 through early
1991, this worker performed this and other related work with
respect to the fiscal year 1989 and 1990 financial statements.
In a memorandum dated October 24, 1989, to Jay Hoyt, the worker
(1) noted that in Management’s financial statements for prior
years the numbers of cattle reflected in the original bills of
sale the Hoyt organization had issued each cattle partnership
were used as the cattle counted in each partnership’s breeding
9In the Oct. 31, 1984, memorandum, Jay Hoyt claimed that
these “cattle exchange transactions” between other partnerships
and FF #3 and FF #4 would be “tax free exchanges”. He further
maintained that the rationale for the “exchanges” was that the
other partnerships would be “receiving” a more mature, “proven
cow” from FF #3 or FF #4, in return for their “giving up” an
unproven, “glamor girl cow”. In fact, the 1984 and 1985
“dispersal sale cattle prices” that FF #3 and FF #4 “realized”
were later offered in evidence by the taxpayers in the Bales v.
Commissioner, T.C. Memo. 1989-568. This valuation evidence
ultimately was relied heavily upon by this Court in reaching its
conclusion that the stated sales prices the Bales cattle-breeding
partnerships had earlier agreed to pay the Hoyt family for their
breeding cattle were within a reasonable range of those cattle’s
fair market value. See id. In further point of fact, as
discussed infra, FF #3 and FF #4 were not liquidated and never
received these “dispersal sale proceeds”.
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