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Accordingly, the argument that an ongoing criminal tax
investigation created a disabling conflict for Jay Hoyt in
executing these extensions is without merit, since no criminal
investigations of Jay Hoyt were being conducted when these
extensions were executed.
The extension concerning RCR #4’s 1984 taxable year was
executed by Jay Hoyt and the IRS on August 1, 1987, shortly
before the U.S. Attorney’s Office in Sacramento declined to
prosecute him for his alleged backdating of documents. As this
Court observed in Phillips v. Commissioner, 114 T.C. at 152,
however, the Court of Appeals for the Second Circuit in Transpac
did not assume that the mere existence of an investigation would
subvert a TMP’s judgment and bend him to the Government’s will in
dereliction of his fiduciary duties to his partners.
As in Phillips, there is no evidence in the instant case
that Jay Hoyt executed the extensions under pressure in exchange
for leniency in relation to any criminal tax investigation of
him. In addition, Jay Hoyt continued to defend the legitimacy of
the sheep partnerships as he did with the cattle partnerships in
the Phillips case. With only minor exceptions, Jay Hoyt executed
the extensions in the instant case during the same time period he
executed the extensions in Phillips.
In the instant case, the Court concludes that petitioners
have failed to establish that Jay Hoyt, in executing the
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