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evaluate the legitimacy of his partnership or the tax benefits
claimed with respect thereto. This argument employs Bales as a
red herring: Bales involved different investors, different
partnerships, different taxable years, and different facts. The
taxpayers in Bales were individual investors whose taxable years
involved were 1974 through 1979. Although the Court held that
the cattle breeding partnerships were bona fide and should not be
disregarded as shams, the taxpayers did not receive all of the
tax benefits they claimed. However, in Durham Farms #1 v.
Commissioner, T.C. Memo. 2000-159, affd. 59 Fed. Appx. 952 (9th
Cir. 2003), we found that by the early 1980s the Hoyt
organization’s cattle management and record keeping practices
changed dramatically, and most of the records, documents, and tax
returns pertaining to the cattle breeding partnerships were
inaccurate and unreliable. In fact, many of the cattle
purportedly purchased by the partnerships never existed.
Therefore, all claimed tax benefits were disallowed in full.
Thus, it would not have been reasonable for petitioner to rely
upon Bales in making investments herein and claiming the tax
benefits that Mr. Hoyt promised would ensue.
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