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“The facts of the matter speak for themselves.” Id. at
227. The IRS had sought waivers of the statute of
limitations from the limited partners, who refused to
execute them. The IRS then went to the three TMPs who
knew themselves to be under criminal investigation in
connection with the partnership and were cooperating
with the government in its case against another
partner. As the court observed, they had “a powerful
incentive to ingratiate themselves to the government.”
Id. They gave the waivers the IRS wanted. The court
properly found the waivers invalid. Trust law,
generally, invalidates the transaction of a trustee who
is breaching his trust in a transaction in which the
other party is aware of the breach. See Restatement of
Trusts, secs. 288-297. Transpac is a salutary
application of this rule to the particular case of a
TMP who should have been seen by the IRS as laboring
under an incapacitating conflict of interest.
Two circumstances differentiate this case. The IRS
made no attempt to get waivers from limited partners.
The partnerships for which Hoyt was being investigated
have not been shown to be the partnerships involved in
this case. It is not intuitively obvious that Hoyt did
what is a routine accommodation--signing a waiver in
order to avoid immediate assessment by the IRS--in
order to ingratiate himself in the investigation of his
partnerships. Phillips has speculated that Hoyt so
acted; he has not proved it.
Similarly, this Court in Phillips v. Commissioner, 114 T.C. at
131-132, in distinguishing the facts in Phillips from those in
Transpac, noted that there was no evidence that: (1) The IRS
approached the limited partners to execute extensions or that
they refused to sign such extensions; (2) the promoter-TMP Jay
Hoyt was, before or during the relevant period, indicted or
convicted of a tax felony or cooperating with the Government; or
(3) the IRS misled the partners about the existence of criminal
tax investigations or ever instructed Jay Hoyt to say nothing
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