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Phillips, this Court and the Court of Appeals for the Ninth
Circuit both rejected the taxpayer-partner’s argument that
section 301.6231(c)-5T, Temporary Proced. & Admin. Regs., supra,
should be construed to require, whenever a criminal tax
investigation of a TMP of a partnership is commenced, that the
IRS automatically remove that individual as TMP.
Respondent further argues that the rationale employed by the
Court of Appeals for the Second Circuit in Transpac Drilling
Venture 1982-12 v. Commissioner, supra, is not applicable here,
because the facts of the instant case, like Phillips, are
distinguishable from those of Transpac. Respondent asserts that
there is no evidence that Jay Hoyt (the TMP), in executing the
extensions, had a disabling conflict of interest as a result of a
criminal tax investigation and was seeking to ingratiate himself
or curry favor with the IRS in exchange for lenient treatment
relating to the criminal investigation.
Respondent maintains that to the extent other partnership
conflicts between Jay Hoyt and the partners existed, those
conflicts were of Jay Hoyt’s making, not due to IRS action or
inaction. Further, respondent asserts that the IRS was not a
party to the dealings between Jay Hoyt and the sheep partners
which created these alleged conflicts of interest, nor was the
IRS involved in concealing Jay Hoyt’s fraud upon the partners or
responsible for his failures.
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