- 69 - claimed. Further, respondent engaged in almost continuous and protracted litigation with the partnerships and partners over the disallowance of partnership tax benefits. However, the decision in Bales v. Commissioner, T.C. Memo. 1989-568, set back respondent’s efforts, as the decision rejected respondent’s economic sham theory and allowed the Bales partners many of their claimed tax benefits. Although in 1989, respondent suspected that Jay Hoyt had been selling a large number of fictitious cattle to the cattle partnerships, the evidence respondent possessed at that time did not confirm this suspicion. As a result, respondent decided that during the examination of the post-1986 cattle and sheep partnership returns, a count and inspection of all the cattle and sheep were essential. From the fall 1992 through spring 1993 livestock count and inspection, respondent determined that the Hoyt organization had greatly overstated the number and value of the livestock owned by the partnerships. As a result of the count and inspection, respondent believed by February 1993 that he possessed sufficient evidence to support the issuance of prefiling notices and freezing tax refunds claimed by partners. Following the respondent’s issuance of prefiling notices to the partners in February 1993, and the completion of the count and inspection of the cattle and sheep, the Examination Division on or about December 30, 1993, issued letters to all the partnersPage: Previous 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 Next
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