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as the preparer instead of Hoyt. If a partner needed a greater
or lesser partnership loss in any year, the deductions that
flowed through from the partnership were quickly adjusted within
the Hoyt Tax Office without the partner’s having to pay a higher
fee to an outside return preparer. Hoyt routinely had the
individual’s Federal income tax returns prepared and filed
claiming large partnership losses before the Form 1065
partnership returns were prepared and filed. Sometimes this
would result in an inconsistency between the loss shown on the
individual return and the amount shown on the partner’s Schedule
K-1. We think the workings of this scheme show that the
partnership returns were signed with intent to evade the
partners’ individual tax liabilities through the use of false and
fraudulent flowthrough partnership losses.
In summary, the record establishes by clear and convincing
evidence that Hoyt knew the partnership returns contained false
and fraudulent deductions and that he intended income tax to be
evaded at the partner level. He was involved in every facet of
the partnerships. He formed and operated the partnerships. He
was involved in the alleged purchase of sheep by the partnerships
from Barnes Ranches. He was involved in the unusual manner in
which the partnership and individual returns were prepared. He
knew that the bills of sale which purportedly identified the
sheep purchased by each partnership listed large numbers of
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Last modified: November 10, 2007