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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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Last modified: November 10, 2007