- 16 -
1987 1988 1989 1990
Income1 $65,750 $59,281 $61,239 $63,388
Partnership losses 142,950 28,972 37,249 41,470
Tax liability -0- 2,344 1,902 1,466
1Includes taxable income from wages, interest, and
dividends.
The Form 1045 and each of the returns from 1987 through 1990 were
prepared by an individual affiliated with the Hoyt organization.
By letter dated April 25, 1989, respondent notified
petitioners that one of their Hoyt partnerships was under review.
This letter stated in relevant part:
Our information indicates that you were a partner in the
above partnership [DSBS 87-C] during the above tax year
[1988]. Based upon our review of the partnership’s tax
shelter activities, we have apprised the Tax Matters Partner
that we believe the purported tax shelter deductions and/or
credits are not allowable and, if claimed, we plan to
examine the return and disallow the deductions and/or
credits. The Internal Revenue Code provides, in appropriate
cases, for the application [of various penalties].
In January 1992, respondent mailed Hoyt investors, including
petitioners, a letter regarding the application of section 469
(relating to passive activity loss limitations). That same
month, Mr. Hoyt mailed a letter to investors, including
petitioners, setting forth arguments that Hoyt investors
materially participated in their investments within the meaning
of section 469. In this letter, Mr. Hoyt stated that
respondent’s assertions in the preceding letter were incorrect,
and that the investors should do what was necessary to
participate in their investment at least 100 or 500 hours per
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