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economic substance, and the methods used in preparing the
individual and partnership returns. See Transpac Drilling
Venture, 1983-2 v. United States, 32 Fed. Cl. at 821 (where the
Court of Federal Claims looked at the sham nature of the
transaction in its analysis of the 6-year fraud statute set forth
in section 6229(c)(1)).
During the years at issue, Hoyt’s scheme was to sell tax
deductions using phoney partnerships that generated false and
fraudulent flowthrough tax deductions. As reflected in our
factual findings, the sheep partnership returns filed for the
periods 1984, 1987, 1988, and 1989 included the following false
or fraudulent items: (1) Depreciation deductions and credits
attributable to nonexistent and overvalued sheep, (2) interest
deductions for illusory indebtedness relating to nonexistent and
overvalued sheep, and (3) false deductions for farm expenses and
guaranteed payments.
Petitioners not only admitted in their pleadings that the
returns signed by Hoyt included false information, but they also
repeatedly referred to Hoyt’s fraudulent conduct and deception in
their other submissions to the Court.
We have examined the structure and workings of Hoyt’s cattle
and sheep partnerships in River City Ranches I, Durham Farms #1
v. Commissioner, T.C. Memo. 2000-159, affd. 59 Fed. Appx. 952
(9th Cir. 2003), and River City Ranches #4, J.V. v. Commissioner,
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