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T.C. Memo. 1999-209. River City Ranches #4, J.V. and Durham
Farms #1 were test cases for Hoyt cattle and sheep partnerships
tried and decided by this Court during 1996 and 1997. In 2001,
we heard the remaining sheep partnership cases that resulted in
our opinion in River City Ranches I, some of which are presently
before us on this remand from the Court of Appeals.
Basically, our findings in River City Ranches I mirror our
findings in the sheep partnership test cases in River City
Ranches #4, J.V., which explain how Hoyt’s scheme worked and show
that the partnership returns contained false and fraudulent
deductions and were prepared by Hoyt with the intent to evade the
tax liability of the partners. They are incorporated by
reference in our fact findings here.
There are several indicia of Hoyt’s fraudulent intent to
evade tax when, as a partner and TMP, he participated in the
preparation of the partnership returns and signed them.
The RCR returns reported depreciation of breeding flocks
calculated on cost bases that Hoyt knew were based on false and
fraudulent flock recap sheets that listed nonexistent sheep, on
purported purchase prices that were much greater than the fair
market value of similar quality sheep, and on promissory notes
that did not create bona fide indebtedness. Moreover, the entire
transaction was without substance, and the partnerships did not
acquire the benefits and burdens of ownership of the sheep.
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