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The only purported business purpose of these partnerships
was their sheep breeding activities. Yet, as we have found, the
partnerships never acquired the benefits and burdens of
ownership, the promissory notes did not evidence valid
indebtedness, and Barnes Ranches never performed under the
sharecrop agreement. Consequently, they could not, and did not,
conduct any economic activities.
There are a number of other facts supporting our conclusion
that the partnerships lacked economic substance and were shams.
For example, there were many irregularities in the partnerships’
documents. Several of the partnerships did not have signed
partnership agreements or had no partnership agreements at all.
There was no separate prospectus for each of the sheep
partnerships; instead Hoyt used the promotional materials he had
prepared for the cattle partnerships. And not all of the sheep
partnerships had all of the principal documents to evidence their
purported sheep sale agreements with Barnes Ranches.
The traditional books and records expected of a partnership
that has economic substance were lacking. The sheep partnerships
did not maintain separate books, records, or assets. None of
them had separate bank accounts.
We are persuaded that all of the above facts support our
conclusion that the partnerships and their purported sheep
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Last modified: November 10, 2007