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6. Removal of TMP for Violating a Fiduciary Duty
Petitioners contend that Mr. Hoyt should have been removed
as TMP by the IRS because of a conflict of interest between Mr.
Hoyt's fiduciary duty to petitioners, as partners of the Hoyt
partnerships, and his self-interest as the subject of several
criminal tax investigations.
Petitioners rely on Transpac Drilling Venture 1982-12 v.
Commissioner, 147 F.3d 221 (2d Cir. 1998), contending that
Transpac holds that the Commissioner has no discretion and must
remove a TMP who is under criminal tax investigation.
However, the Transpac decision involved distinguishable
facts. In Transpac, the IRS began a civil tax audit of the
Transpac partnerships in the latter part of 1983. By November
1985, however, the civil audit had uncovered issues which were
referred to CID for criminal investigation. See id. at 223.
While the criminal investigation was proceeding, the IRS
approached limited partners of the Transpac partnerships and
asked them to sign extension agreements for the 1982 taxable
year. Most of the limited partners refused, so the IRS then
approached the partnership's TMP's and made the same extension
requests. The TMP's acquiesced and executed the extension
agreements and thereafter continued to execute extension
agreements through March 1988.14 See id. at 224.
14 As the IRS did not issue FPAA's until November 1989, the 3-
year period of limitations would have expired but for the signed
extensions.
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