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business without thorough tax advice, and don’t waste much
time trying to learn tax law from an Offering Circular.
Despite this warning, the document spent numerous pages
explaining the tax benefits of investing in a Hoyt partnership,
and explaining why investors should trust only Mr. Hoyt’s
organization to prepare their individual tax returns:
It is the recommendation of the General Partner, as outlined
in the private placement offering circular, that a
prospective Partner seek independent advice and counsel
concerning this investment. * * * The Limited Partners
should then authorize the Tax Office of W.J. Hoyt Sons to
prepare their personal returns. * * * Then you have an
affiliate of the Partnership preparing all personal and
Partnership returns and controlling all audit activity with
the Internal Revenue Service. * * * Then, all Partners are
able to benefit from the concept of “Circle the Wagons,” and
no individual Partner can be isolated and have his tax
losses disallowed because of the incompetence or lack of
knowledge of a tax preparer who is not familiar with the
law, regulations, format, procedures, and operations
concerning the Partnership that are required to protect the
Limited Partners from Internal Revenue audits. * * * If a
Partner needs more or less Partnership loss any year, it is
arranged quickly within the office, without the Partner
having to pay a higher fee while an outside preparer spends
more time to make the arrangements.
Finally, the document warned that there remained a chance that “A
change in tax law or an audit and disallowance by the IRS could
take away all or part of the tax benefits, plus the possibility
of having to pay back the tax savings, with penalties and
interest.”
At the time that he initially made the investment in 1986,
petitioner believed that the investment would produce a profit
and provide retirement income.
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Last modified: May 25, 2011