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Mr. Hoyt also encouraged the limited partners to refuse to
cooperate with Government investigators. W.J. Hoyt & Sons sent
letters to some limited partners telling them that they could
refuse to be deposed by the IRS, and, if already deposed, that
they could refuse to sign the interview transcript.
In sum, we are not persuaded that Mr. Hoyt had a disabling
conflict of interest in this case or violated his fiduciary duty
to petitioners. On the basis of the record, we find and hold
that Mr. Hoyt did not have a conflict of interest which required
the removal of his TMP designation or invalidated the extensions
of the periods of limitations.
7. Abuse of Discretion by Respondent
Petitioners contend that respondent's failure to send a
written notice to Mr. Hoyt, informing him that his partnership
items would be treated as nonpartnership items pursuant to
section 301.6231(c)-5T, Temporary Proced. & Admin. Regs., 52 Fed.
Reg. 6793 (Mar. 5, 1987), was an abuse of discretion.
Petitioners assert that, because Mr. Hoyt was the subject of
criminal investigations and because certain IRS officials
countersigning the extension agreements knew of the criminal tax
investigations of Mr. Hoyt, the failure of the IRS to notify Mr.
Hoyt that his partnership items would be treated as
nonpartnership items was arbitrary and unreasonable.
Petitioners once again rely on Transpac Drilling Venture
1982-12 v. Commissioner, 147 F.3d 221 (2d Cir. 1998), in which
the Court of Appeals disagreed with this Court’s conclusion that
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