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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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Last modified: November 10, 2007