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years of their investments. Petitioner’s 1981 return, on which
the deduction and credits appeared that underlie the deficiency
in each year in issue in this case, was prepared and signed by
Mr. Hoyt. From approximately 1980 through 1997, Mr. Hoyt was a
licensed enrolled agent, and as such he represented many of the
investor-partners before the Internal Revenue Service (IRS)
before he was disbarred as enrolled agent in 1998.
Beginning in February 1993, respondent generally froze and
stopped issuing income tax refunds to partners in the investor
partnerships. The IRS issued prefiling notices to the investor-
partners advising them that, starting with the 1992 taxable year,
the IRS would disallow the tax benefits that the partners claimed
on their individual returns from the investor partnerships, and
the IRS would not issue any tax refunds these partners might
claim attributable to such partnership tax benefits.
Also beginning in February 1993, an increasing number of
investor-partners were becoming disgruntled with Mr. Hoyt and the
Hoyt organization. Many partners stopped making their
partnership payments and withdrew from their partnerships, due in
part to respondent’s tax enforcement. Mr. Hoyt urged the
partners to support and remain loyal to the organization in
challenging the IRS’s actions. The Hoyt organization warned that
partners who stopped making their partnership payments and
withdrew from their partnerships would be reported to the IRS as
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