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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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