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Based on the above conclusions from its count of the cattle
and sheep, the IRS, beginning in February 1993, generally froze
and stopped issuing income tax refunds to partners in the cattle
and sheep partnerships. The IRS issued prefiling notices to the
investor-partners advising them that, starting with the 1992
taxable year, the IRS would (1) disallow the tax benefits that
the partners claimed on their individual returns from the cattle
and sheep partnerships and (2) not issue any tax refunds these
partners might claim attributable to such partnership tax
benefits.10
Respondent eventually issued: (1) Notices of deficiency to
numerous investor-partners for the 1980, 1981, and 1982 tax
years, in which respondent determined that none of the tax
benefits the partners claimed from the cattle and sheep
partnerships were allowable; and (2) FPAAs to many of the cattle
and sheep partnerships for the taxable years 1983, 1984, 1985,
and 1986, in which respondent disallowed the tax benefits these
partnerships claimed.
Following the IRS’s freezing in February 1993 of tax refunds
to partners in the cattle and sheep partnerships, the Hoyt
organization experienced financial difficulties. Freezing the
10 Ultimately, this Court, in Durham Farms #1, J.V. v.
Commissioner, T.C. Memo. 2000-159, and River City Ranches #4,
J.V. v. Commissioner, T.C. Memo. 1999-209, upheld respondent’s
disallowance of almost all tax benefits claimed by those cattle
and sheep partnerships for certain post-1986 taxable years.
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