River City Ranches #1 Ltd., Jeffry Bergamyer, Tax Matters Partner - Page 13




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          could they identify the specific breeding sheep they owned during           
          the periods at issue.  No sheep were transferred to the                     
          partnerships from Barnes Ranches.                                           
               Under the sharecrop operating agreements, Barnes Ranches was           
          to manage and pay all expenses with respect to each partnership’s           
          breeding sheep.  However, Barnes Ranches did not provide the                
          partnerships with the management services required under the                
          agreements.  Barnes Ranches did not, as required under the                  
          sharecrop agreement, maintain adequate records allowing it to               
          identify at all times the breeding sheep owned by each                      
          partnership.  Barnes Ranches did not increase the number of                 
          breeding sheep owned by the partnerships by a net 5 percent per             
          year as required by the sharecrop agreement.  Barnes Ranches did            
          not replace ewes purportedly owned by the partnerships that could           
          no longer serve as breeding ewes with other ewes as required                
          under the sharecrop agreement, nor did the partnerships receive             
          any other benefit from the fertility warranty in the sharecrop              
          agreement.                                                                  
               The sheep partnership transactions were shams and lacked               
          economic substance.  The partnerships themselves were shams and             
          lacked economic substance.  The partnerships had no business                
          purpose beyond the generation of tax benefits.                              










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