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Hoyt organization, because the “payment” was only “applied”
against the grossly inflated stated purchase price that
partnership previously purportedly agreed to pay for its
“breeding cattle”. In actuality, the Hoyt family and the Hoyt
organization never contemplated that each partnership’s
promissory note would ever have to be paid by that partnership
and its partners on a genuinely recourse basis.
Jay Hoyt and the Hoyt organization entities involved in the
partnerships’ breeding cattle purchase transactions were not
independent parties acting at arm’s length. Their actions
evidence that they themselves viewed the partnership notes as
essentially being illusory and having no practical economic
effect and that the notes were merely a facade to support the tax
benefits Jay Hoyt and the Hoyt organization had promised
investors in the partnerships. See Ferrell v. Commissioner, 90
T.C. at 1186-1190; see also River City Ranches #4, J.V. v.
Commissioner, T.C. Memo. 1999-209; Hunter v. Commissioner, T.C.
Memo. 1982-126 n.17.
For the foregoing reasons and on the record presented, the
Court concludes that the partnership notes were not valid
indebtedness.
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