River City Ranches #1 Ltd., Leon Shepard, Tax Matters Partner - Page 83

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               And, contrary to petitioners’ assertion that the traditional            
          elements of equitable estoppel have been met, thus warranting a              
          departure from the year of discovery requirement in section                  
          165(e), the record reflects that respondent did not misrepresent             
          or conceal from the partnerships or the partners any material                
          facts obtained in the audits.  Respondent audited the various                
          partnerships from 1984 through 1996, and reported its findings to            
          the partnerships and partners.  Respondent issued all notices of             
          beginning of administrative proceeding, FPAAs, and prefiling                 
          notices in a timely manner in accordance with the Internal                   
          Revenue Code.  According to petitioners, respondent “advised the             
          partners that their partnerships were being audited and adjusted,            
          because [respondent] determined the partnerships were shams and              
          constituted improper tax shelters.”                                          
               Petitioners, nonetheless, fault respondent for not doing                
          more to stop the fraud perpetrated by Jay Hoyt.  They assert that            
          respondent, well before 1993, should have acted more effectively             
          to protect the partners and prospective investors from Jay Hoyt’s            
          fraudulent activities.  Our review of the record discloses the               
          substantial difficulties that respondent encountered in obtaining            
          a sufficient amount of information to conclude the existence of a            
          fraud prior to 1993.                                                         
               By the early 1980s, respondent generally disallowed the tax             
          benefits the cattle and sheep partnerships and their partners                






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