River City Ranches #1 Ltd., Leon Shepard, Tax Matters Partner - Page 36

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          taxable years.9  During these examinations, Jay Hoyt and the Hoyt           
          organization failed to provide adequate documents and records               
          substantiating the livestock the partnerships purportedly                   
          acquired and owned.                                                         
               Following the 1989 Bales opinion, the IRS attempted to                 
          verify the existence of all purported livestock that the cattle             
          and sheep partnerships allegedly owned for post-1979 taxable                
          years.  As a result of an administrative summons enforcement                
          action brought in the United States District Court for the                  
          District of Oregon (U.S. District Court) in 1992, the IRS first             
          inspected and counted all the purported cattle and sheep that               
          these partnerships allegedly owned from fall 1992 through spring            
          1993.  The livestock count and inspection were conducted in                 
          connection with the IRS’s examinations of the post-1986 taxable             
          year returns of the partnerships.                                           
               By February 1993, although the IRS’s inspection and                    
          livestock count were not fully completed, IRS personnel concluded           
          that Jay Hoyt and the Hoyt organization had greatly overstated              
          the number of actual breeding animals that these partnerships               
          claimed to own.  The IRS further concluded that Jay Hoyt and the            
          Hoyt organization had also grossly overvalued the livestock upon            
          which the partnerships were claiming tax benefits.                          


               9  The unified partnership audit and litigation provisions             
          of secs. 6221-6233, applied to these partnership taxable years.             
          See supra note 8.                                                           





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