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Discussion
This case is part of a larger group of cases involving
cattle and sheep breeding partnerships organized by Mr. Hoyt.
For a description of the Hoyt organization and its operation, see
e.g., Barnes v. Commissioner, T.C. Memo. 2004-266; River City
Ranches #1, Ltd. v. Commissioner, T.C. Memo. 2003-150; Mekulsia
v. Commissioner, T.C. Memo. 2003-138, affd. __ F.3d __ (6th Cir.
Nov. 18, 2004); River City Ranches #4, J.V. v. Commissioner, T.C.
Memo. 1999-209, affd. 23 Fed. Appx. 744 (9th Cir. 2001); Mitchell
v. Commissioner, T.C. Memo. 1995-411.
The Commissioner’s determinations in a notice of deficiency
are generally presumed correct, and the taxpayer must prove those
determinations wrong in order to prevail. Rule 142(a); Welch v.
Helvering, 290 U.S. 111, 115 (1933).4 In this case, in which the
correctness of respondent’s determinations of tax has been
conceded, the burden is on petitioners to show that the additions
to tax and accuracy-related penalties should not apply.
Petitioners did not appear at trial and did not testify as
to facts underlying their investment in the Hoyt cattle operation
4 Sec. 7491, which under some circumstances shifts the
burden of proof or production to the Commissioner, is
inapplicable in this case. Sec. 7491 applies only to court
proceedings arising in connection with examinations commencing
after July 22, 1998. Internal Revenue Service Restructuring and
Reform Act of 1998, Pub. L. 105-206, sec. 3001(c), 112 Stat. 727.
Respondent’s examination of petitioners’ 1994 return began before
Aug. 16, 1996, and their 1995 return was examined before Feb. 24,
1997.
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