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other businesses and properties; (3) participation on both sides
of the livestock sales that the Hoyt organization made to the
partnerships; (4) negotiation of tax issues with the IRS where
the interests of the Hoyt family and the Hoyt organization
conflicted with the interests of the Hoyt cattle and sheep
partnerships and their partners; (5) commingling of partnership
payments and failing to account for his and the Hoyt
organization’s use of those funds; (6) incentive to make
concessions to the IRS, while under criminal investigation, that
were harmful to the partners in order to have the IRS abate
certain tax return preparer penalties that the IRS had assessed
against him; (7) failure to file the partnership returns timely,
thereby incurring late filing penalties; and (8) failure, during
1986, to either (a) inform the partners that he was under
criminal investigation by the IRS, or (b) withdraw from his
fiduciary roles on behalf of the partners.
2. Respondent’s Arguments
Respondent contends that the periods of limitations
applicable to the partnership years in question have not expired,
because the extension agreements that Jay Hoyt (the TMP) and the
IRS executed are valid and binding upon the partners. Respondent
asserts that Phillips v. Commissioner, supra, largely controls
the resolution of the limitations issue raised by petitioners in
the instant case. Specifically, respondent notes that in
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