Kenneth and Dorothy Hitchen - Page 7

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          as River City Ranches 85-2 (RCR 85-2).  Petitioners were told by            
          the Hoyt organization to ignore communications from the Internal            
          Revenue Service (IRS) as they were merely harassing Hoyt                    
               Petitioners continued investing in the Hoyt partnership                
          through approximately 1994.  Petitioners continued remitting                
          their Federal income tax refunds to the Hoyt partnership until              
          Mr. Hitchen retired from General Mills in 1991.  Starting in                
          approximately 1990, petitioners began making substantial out-of-            
          pocket cash payments in response to various requests and                    
          “assessments” by the partnership.  Petitioners also were required           
          to pay additional amounts throughout the years representing tax             
          return preparation fees.  The losses and credits claimed by                 
          petitioners with respect to their taxable years 1984 through 1989           
          are discussed below; petitioners claimed a deduction for a                  
          partnership loss of $42,260 in 1990, but they did not claim a               
          deduction for either a farming loss or a partnership loss in                
          1991.  In a letter to petitioners dated February 6, 1992, Mr.               
          Hoyt stated in relevant part:                                               
               I have been notified by the General Partners office                    
               that your 1990 contribution is still past due.  Because                
               this balance of $3500 has not been paid we are                         
               beginning collection enforcement.  Your partnership                    
               note authorizes us to repossess shares of unpaid                       
               partnership units.                                                     
               When your cattle, sheep or truck units are taken back                  
               the Internal Revenue Service regulations require us to                 
               notify them you have debt relief income of about 13                    

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