River City Ranches #1 Ltd., Jeffry Bergamyer, Tax Matters Partner - Page 7




                                        - 7 -                                         
          be from the tax savings.  Another brochure, bearing the heading             
          “Harvesting Tax Savings by Farming the Tax Code”, also emphasized           
          tax savings and explained that the investment could be financed             
          from the investors’ tax savings, which the investors otherwise              
          would have paid to the IRS.                                                 
               The partnership interest and the resulting flowthrough                 
          partnership deductions were “purchased” with 75 percent of the              
          individual’s tax savings resulting from the flowthrough                     
          partnership deductions.  The 75-percent tax savings were                    
          determined by first computing an individual’s tax liability                 
          without participation in a Hoyt partnership and then computing              
          the individual’s tax savings using the Hoyt partnership loss.               
          The difference in the two calculations was the individual’s tax             
          savings, of which 75 percent was paid to the Hoyt organization              
          and 25 percent was to be retained by the individual.  In                    
          addition, in the initial year of investment, amended returns                
          claiming refunds were often filed for the individual’s prior 3              
          taxable years.  The Hoyt organization received 75 percent of such           
          refunds, and the individual retained 25 percent.  Each year the             
          individual’s payment to the Hoyt organization was adjusted to               
          reflect the 75/25 split.  Because the investment was based on               
          “tax savings” and not on original cash outlay, Hoyt’s partnership           
          scheme essentially paid for itself.                                         








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