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in which it warned them that IRS personnel had concluded and
determined that: (1) A number of fictitious breeding cattle and
sheep had been sold to the Hoyt cattle and sheep partnerships;
and (2) Jay Hoyt and the Hoyt organization had overstated both
the numbers and value of the purported livestock that the
partnerships allegedly owned.
In the Examination Division letter sent to each partner,
respondent specifically informed the partners of the problems
that respondent had uncovered in the Hoyt organization’s tax
shelter program as a result of the respondent’s count and
inspection of the cattle and sheep. The letter provided the
partners with sufficient information to place them on notice that
fraudulent activity might be taking place. By providing the
partners with their findings, respondent discharged any duty it
arguably had to the partnerships and partners, as it was then up
to them to decide whether to take advantage of this
information.16 E.g., Wintner v. Commissioner, T.C. Memo. 1977-
144 (noting that IRS agents had told the taxpayer or put the
taxpayer on notice about the irregularities the agents had
uncovered in examining the books and records of the taxpayer’s
business; concluding further that having provided the taxpayer
16 Certainly by 1993, the partners also knew or should have
known that the IRS might: (1) Disallow the tax benefits that the
Hoyt cattle and sheep partnerships and their partners claimed;
and (2) attempt to uphold such disallowances and partnership
adjustments in any tax litigation that the partnerships and
partners commenced.
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