PDFT QUICK UPDATE
In part 2, we cover the Issues
and Facts.
In part 3, we cover the Legal Arguments.
The partnerships filed this brief with the Tax Court on March 17, 1999.
This is an AMICUS brief (friend of the court) that supports the Motion to Vacate the
Memorandum of Understanding (MOU) filed by participating partner attorneys (MOVANTS) a few
months ago. The MOU is the basis for the 1980 (with carry backs) to 1986 IRS bills
being sent to the partners.
I hope you can appreciate the tedious research, thought, and effort put into this
document. I believe Monty Cobb and his staff have done an excellent job of laying
out the facts in this brief.
Your support of the PDFT makes this and the administrative support of the partnership
possible. Thank you again for your continued support of the
PDFT and Monty Cobb.
-- Gary Blackburn
Exhibits are not attached.
Please note: Counsel presented this AMICUS brief to tax court on March
16, 1999 in support of motions to vacate the Memorandum of Understanding (MOU) for the tax
years prior to 1987. The Tax Court could not accept this brief because no briefing
schedule has been set for the motion to vacate the MOU. However, the Court advised we can
file this brief when a briefing schedule is set. This brief outlines the facts and
supporting documents surrounding the MOU.
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UNITED STATES TAX COURT
SHORTHORN GENETIC ENGINEERING, 1982-2, LTD.,
SHORTHORN GENETIC ENGINEERING 1982-4, LTD.,
SHORTHORN GENETIC ENGINEERING 1982-5, LTD.,
Walter J. Hoyt, III,
Tax Matters Partner, et al.,
Petitioners,
v.
COMMISSIONER OF INTERNAL REVENUE,
Respondent.,
Docket Nos.
22003-89 29295-89
22008-89 29854-89
22069-89 29855-89
22070-89 29856-89
24514-89 30478-89
27641-89 30479-89
27675-89 20224-90
28383-89 21463-90
28384-89 21954-90
28491-89 23531-90
28492-89 28577-90
29260-89
BR - HOYT FARMS
Judge Goldberg
AMICUS BRIEF IN SUPPORT OF MOVANTS' MOTION FOR LEAVE TO FILE MOTION TO VACATE PRELIMINARY
STATEMENT
Amici are the 43 Hoyt Investor Partnerships on the list attached as
Exhibit 1. Petitioners and Movants in these Tax Court proceedings are partners in
Amici. Amici are parties in the Bankruptcy proceedings pending in Portland, Oregon in
which all assets of the Hoyt entities have been liquidated, and in which all claims
against nearly all Hoyt entities will be resolved. Amici have a significant stake in
these Tax Court proceedings because the outcome will affect all partners in these
Investor Partnerships. Each partner who has not reached a settlement with the IRS
has received bills from the IRS for taxes, penalties and interest for these tax years in
amounts which are financially devastating (See Exhibit 3). Those bills are the
result of the Memorandum of
Understanding (MOU) entered into between Respondent and Walter J. Hoyt III.
Amici support the motion of participating partners (Movants) for leave to file motion to
vacate decision out of time. Amici emphasize the need to abate the orders and allow
discovery and an evidentiary hearing in this Court to determine whether improprieties in
the negotiation and signing of the Memorandum of Understanding justify setting aside the
MOU and this Court's orders based on the MOU.
Discovery in the bankruptcy proceedings, although more focused on years after 1991,
suggests that the Hoyt business was more solid in the early and mid-80s than after
1992. In other words, there was less reason to compromise on deductions for the MOU
years than for later years. The MOU, however, was negotiated long after the tax years it
controls. By 1993, when the MOU was negotiated and signed, Hoyt's businesses were in
trouble, Hoyt was in trouble, and he was feeling the governmental heat. He negotiated
strong years at a weak time.
In November, 1996, this Court entered its orders approving the May 20, 1993, Memorandum
of Understanding between Respondent and Walter J. Hoyt III (Hoyt or Jay Hoyt) and ruling
on its import.
Evidence subsequently produced in the bankruptcy cases involving Hoyt entities strongly
suggests that when Hoyt signed the MOU his conflicts of interest had terminated his
authority to bind the investor partnerships, and that by acting with knowledge of Hoyt's
conflict of interest, both Hoyt and the Respondent perpetrated a fraud on this Court.
Additional discovery is necessary, however, before the Parties will be prepared to
participate in a full evidentiary hearing on the matter.
The adverse effect of Hoyt's failure to adequately represent the partners' interests and
his failure to have legal counsel is demonstrated by one glaring omission: "THE MOU
FAILS TO ADDRESS PENALTIES AND INTEREST." The result has been erroneous
assessments of tax motivated
transaction interest and penalties against individual partners.
In part 2, we cover the Issues and Facts.
In part 3, we cover the Legal Arguments.
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