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In the years 1987 through 1991, petitioners used the Hoyt
investment to report a total Federal income tax liability of
$6,511 on income totaling $322,458. In addition, petitioners
filed the Form 1045 which purportedly reduced their combined 1984
and 1985 Federal income liabilities from $15,165 to zero.
Petitioners claimed these tax benefits based solely on the advice
that they received from the promoters of the investment and from
other Hoyt investors. Furthermore, the promotional materials
that petitioners received had clearly indicated that there were
substantial tax risks in making an investment. Nevertheless,
petitioners did not investigate the tax claims being made by the
Hoyt organization with anyone outside the organization.
When it came time to prepare petitioners’ tax returns and
claim the losses being reported by the Hoyt partnerships,
petitioners relied on the very people who were receiving the bulk
of the tax savings generated by the claims. Thus, the same
individuals who sold petitioners an interest in the Hoyt
partnerships and who ran the purported ranching operations also
prepared the partnerships’ tax returns, prepared petitioners’ tax
returns, and received from petitioners most of the tax savings
that resulted from the positions taken on petitioners’ returns.
With respect to 1991, the year in issue in this case,
petitioners claimed that they incurred $59,476 in losses from the
Hoyt partnerships. Ms. Hansen did not know, and there is no
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