River City Ranches #1 Ltd., Jeffry Bergamyer, Tax Matters Partner - Page 22

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          to other partnerships and that he was depreciating livestock that           
          did not exist.  By February 1993, although the IRS’s inspection             
          and livestock count were not fully completed,9 IRS personnel                
          concluded that Hoyt had greatly overstated the number of breeding           
          animals that these partnerships claimed to own and had grossly              
          overvalued the livestock upon which the partnerships were                   
          claiming tax benefits.  As a result of the count and inspection,            
          the IRS believed by February 1993 that it possessed sufficient              
          evidence to support the issuance of prefiling notices and                   
          freezing tax refunds claimed by the partners.                               
               On the basis of the above conclusions from its count of the            
          cattle and sheep, the IRS, beginning in February 1993, generally            
          froze and stopped issuing income tax refunds to partners in the             
          cattle and sheep partnerships.10  The IRS issued prefiling                  
          notices to the investor-partners advising them that, starting               
          with the 1992 taxable year, the IRS would:  (1) Disallow the tax            

               9The IRS retained cattle expert Ron Daily to conduct a                 
          physical count of all cattle held by the Hoyts as of yearend                
          1992.  The count was conducted with Hoyt personnel from October             
          1992 through April 1993.  Martinez v. United States, 341 Bankr.             
          568, 571 (Bankr. E.D. La. 2006).                                            
               10Following the IRS’s freezing in February 1993 of tax                 
          refunds to partners in the cattle and sheep partnerships, the               
          Hoyt organization experienced financial difficulties.  Freezing             
          the tax refunds greatly diminished the amount of money the Hoyt             
          organization obtained from new and existing partners.  An                   
          increasing number of investor-partners became disgruntled with              
          Hoyt and the Hoyt organization.  Many partners stopped making               
          their partnership payments and withdrew from their partnerships.            

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