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business credit from petitioner’s taxable year 1986. While
application of the credit purportedly would have resulted in the
elimination of petitioner’s regular tax liability in 1983, 1984,
and 1985, petitioner would have reported liability for
alternative minimum tax of $855 in 1984 and $992 in 1985.
By letter dated May 23, 1988, respondent notified petitioner
that SGE 84-2's taxable year 1987 was under review. This letter
stated in relevant part:
Our information indicates that you were a partner in the
above partnership during the above tax year. 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].
By similar letter dated May 9, 1989, respondent notified
petitioner that another of his Hoyt partnerships, Timeshare
Breeding Service (TBS), was under review with respect to its
taxable year 1988.
In January 1992, respondent mailed Hoyt investors, including
petitioner, 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
petitioner, setting forth arguments that Hoyt investors
materially participated in their investments within the meaning
of section 469. In this letter, Mr. Hoyt stated that
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