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resulting flowthrough partnership deductions were “purchased”
with 75 percent of the partner’s tax savings resulting from the
flowthrough partnership deductions. The 75-percent tax savings
were determined first by computing the partner’s tax liability
without participation in a Hoyt partnership and then computing
the partner’s tax savings using the Hoyt partnership loss. The
difference in the two calculations was the partner’s tax savings,
of which 75 percent was paid to the Hoyt organization and 25
percent was to be retained by the partner. In addition, in the
initial year of investment, amended returns claiming refunds were
often filed for the partner’s prior 3 taxable years. The Hoyt
organization received 75 percent of such refunds, and the
partners retained 25 percent. Each year the partner’s payment to
the Hoyt organization was adjusted to reflect the 75/25 split.
Because the investment was based on “tax savings” and not on
original cash outlay, Hoyt’s partnership scheme essentially paid
for itself.
It is clear that the sheep partnerships were merely a facade
Hoyt used to provide the fraudulent tax benefits he promised to
the partnerships’ investors. Hoyt’s promotional materials so
indicate. Hoyt did not have a separate prospectus for each of
the sheep partnerships. Instead, he used the same promotional
materials he had prepared for the cattle partnerships. And the
promotional materials used to market the investments focused
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Last modified: November 10, 2007