River City Ranches #1 Ltd., Leon Shepard, Tax Matters Partner - Page 38

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          tax refunds greatly diminished the amount of money the Hoyt                 
          organization obtained from new and existing partners.                       
               After the opinion in Bales was filed and appropriate                   
          decisions were entered, settlement negotiations were conducted              
          between Jay Hoyt and the IRS, which culminated in the MOU.                  
               Beginning in 1993, an increasing number of investor-partners           
          were becoming disgruntled with Jay Hoyt and the Hoyt                        
          organization.  Many partners stopped making their partnership               
          payments and withdrew from their partnerships, due in part to               
          respondent’s tax enforcement.  Jay Hoyt urged the partners to               
          support and remain loyal to the organization in challenging the             
          IRS’s actions.  The Hoyt organization warned that partners who              
          stopped making their partnership payments and withdrew from their           
          partnerships (1) would be reported to the IRS as having                     
          substantial debt relief income and (2) would have to deal with              
          the IRS on their own.                                                       
               On or about June 8, 1995, in the 32d Judicial District Court           
          for the Parish of Terrebonne, State of Louisiana, a group of                
          investors obtained an $11 million default judgment against Jay              
          Hoyt, Management, MLP, and several cattle breeding partnerships             
          for fraud and other violations.  See Mabile, et al. v. Walter J.            
          Hoyt, III, et al., No. 95-112222.  On February 24, 1997, the                
          plaintiffs in the Louisiana lawsuit filed involuntary bankruptcy            
          petitions in the U.S. Bankruptcy Court for the District of Oregon           






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