                           T.C. Memo. 1996-515



                         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.,1
Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent


Docket Nos.    22003-89,       22008-89,       Filed November 20, 1996.
               22069-89,       22070-89,
               24514-89,       27641-89,
               27675-89,       28383-89,
               28384-89,       28491-89,
               28492-89,       29260-89,
               29295-89,       29854-89,
               29855-89,       29856-89,
               30478-89,       30479-89,
               20224-90,       21463-90,
               21954-90,       23531-90,
               28577-90.
1
      The following cases are consolidated herewith: 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, docket No. 22008-89; Shorthorn Genetic Engineering 1985-1, Ltd.,
Shorthorn Genetic Engineering 1985-2, Ltd., Shorthorn Genetic Engineering
1985-3, Ltd., Shorthorn Genetic Engineering 1985-4, Ltd., Shorthorn Genetic
Engineering 1985-5, Ltd., 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, docket No. 22069-89;
Durham Genetic Engineering 1985-1, Ltd., Durham Genetic Engineering 1985-2,
Ltd., Durham Genetic Engineering 1985-3, Ltd., Durham Genetic Engineering
1985-4, Ltd., Durham Genetic Engineering 1985-5, Ltd., Walter J. Hoyt III, Tax
Matters Partner, docket No. 22070-89; Shorthorn Genetic Engineering 1984-3,
Ltd., Shorthorn Genetic Engineering 1985-5, Ltd., Walter J. Hoyt III, Tax
Matters Partner, docket No. 24514-89; Timeshare Breeding Service 1984-4, Ltd.,
Walter J. Hoyt III, Tax Matters Partner, docket No. 27641-89; Shorthorn
Genetic Engineering 1984-1, Ltd., Shorthorn Genetic Engineering 1984-5, Ltd.,
Walter J. Hoyt III, Tax Matters Partner, docket No. 27675-89; Shorthorn
Genetic Engineering 1982-3, Ltd., Shorthorn Genetic Engineering, 1983-1, Ltd.,
Walter J. Hoyt III, Tax Matters Partner, docket No. 28383-89; Shorthorn
Genetic Engineering 1983-1, Ltd., Walter J. Hoyt III, Tax Matters Partner,
docket No. 28384-89; Timeshare Breeding Service 1983-2, Ltd., Timeshare
Breeding Service 1983-3, Ltd., Timeshare Breeding Service 1984-1, Ltd.,
Timeshare Breeding Service 1984-2, Ltd., Timeshare Breeding Service 1984-3,
Ltd., Walter J. Hoyt III, Tax Matters Partner, docket No. 28491-89; Timeshare
Breeding Service 1983-2, Ltd., Timeshare Breeding Service 1983-3, Ltd.,
Timeshare Breeding Service 1984-1, Ltd., Timeshare Breeding Service 1984-2,
Ltd., Timeshare Breeding Service 1984-3, Ltd., Walter J. Hoyt III, Tax Matters
                                   - 2 -


Partner, docket No. 28492-89; Shorthorn Genetic Engineering 1984-2, Ltd.,
Shorthorn Genetic Engineering 1983-2, Ltd., Shorthorn Genetic Engineering
1982-1, Ltd., Shorthorn Genetic Engineering 1984-4, Ltd., Walter
                                                            (continued...)

     Walter J. Hoyt III (tax matters partner), pro se.

     Gary L. Blackburn (participant other than tax matters
partner), pro se.

     Margaret A. Martin, for respondent.




1
 (...continued)
J. Hoyt III, Tax Matters Partner, docket No. 29260-89; Shorthorn Genetic
Engineering 1983-3, Ltd., Shorthorn Genetic Engineering 1984-2, Ltd.,
Shorthorn Genetic Engineering 1983-2, Ltd., Shorthorn Genetic Engineering
1982-1, Ltd., Shorthorn Genetic Engineering 1984-4, Ltd., Walter J. Hoyt III,
Tax Matters Partner, docket No. 29295-89; Shorthorn Genetic Engineering, 1983-
2, Ltd., Walter J. Hoyt III, Tax Matters Partner, docket No. 29854-89;
Shorthorn Genetic Engineering, 1983-3, Ltd., Walter J. Hoyt III, Tax Matters
Partner, docket No. 29855-89; Shorthorn Genetic Engineering, 1983-3, Ltd.,
Walter J. Hoyt III, Tax Matters Partner, docket No. 29856-89; Shorthorn
Genetic Engineering, 1982-1, Ltd., Walter J. Hoyt III, Tax Matters Partner,
docket No. 30478-89; Timeshare Breeding Service No. 2, Ltd., Timeshare
Breeding Service No. 3, Ltd., Walter J. Hoyt III, Tax Matters Partner, docket
No. 30479-89; Shorthorn Genetic Engineering 1982-1, Ltd., Shorthorn Genetic
Engineering 1982-2, Ltd., Shorthorn Genetic Engineering 1982-3, Ltd.,
Shorthorn Genetic Engineering 1982-4, Ltd., Shorthorn Genetic Engineering
1982-5, Ltd., Walter J. Hoyt III, Tax Matters Partner, docket No. 20224-90;
Shorthorn Genetic Engineering 1983-1, Ltd., Shorthorn Genetic Engineering
1983-2, Ltd., Shorthorn Genetic Engineering 1983-3, Ltd., Shorthorn Genetic
Engineering 1984-1, Ltd., Shorthorn Genetic Engineering 1984-2, Ltd.,
Shorthorn Genetic Engineering 1984-3, Ltd., Shorthorn Genetic Engineering
1984-4, Ltd., Shorthorn Genetic Engineering, 1984-5, Ltd., Walter J. Hoyt III,
Tax Matters Partner, docket No. 21463-90; Shorthorn Genetic Engineering 1985-
1, Ltd., Shorthorn Genetic Engineering 1985-2, Ltd., Shorthorn Genetic
Engineering 1985-3, Ltd., Shorthorn Genetic Engineering 1985-4, Ltd.,
Shorthorn Genetic Engineering 1985-5, Ltd., Walter J. Hoyt III, Tax Matters
                                   - 3 -


Partner, docket No. 21954-90; Durham Genetic Engineering 1983-2, Ltd., Durham
Genetic Engineering 1983-3, Ltd., Durham Genetic Engineering 1984-1, Ltd.,
Durham Genetic Engineering 1984-2, Ltd., Durham Genetic Engineering 1984-3,
Ltd., Durham Genetic Engineering 1984-4, Ltd., Walter J. Hoyt III, Tax Matters
Partner, docket No. 23531-90; Durham Genetic Engineering 1985-1, Ltd., Durham
Genetic Engineering 1985-2, Ltd., Durham Genetic Engineering 1985-3, Ltd.,
Durham Genetic Engineering 1985-4, Ltd., Durham Genetic Engineering 1985-5,
Ltd., Walter J. Hoyt III, Tax Matters Partner, docket No. 28577-90.

                MEMORANDUM FINDINGS OF FACT AND OPINION

     DAWSON, Judge:      These consolidated cases were assigned to

Special Trial Judge Stanley J. Goldberg pursuant to section

7443A(b)(4) and Rules 180, 181, and 183.2          The Court agrees with

and adopts the opinion of the Special Trial Judge which is set

forth below.

                  OPINION OF THE SPECIAL TRIAL JUDGE

     GOLDBERG, Special Trial Judge:         Respondent issued a notice

of final partnership administrative adjustments to each limited

partnership involved in these consolidated cases, determining

adjustments in the amounts and for the tax years as set forth in

the Appendix.

     Walter J. Hoyt III (petitioner), the tax matters partner for

each limited partnership (referred to collectively as

partnerships) involved herein, filed a petition for

redetermination of the partnership adjustments.           All issues,

except one, have been settled by stipulations so that the only

remaining issue for decision is the proper allocation of

partnership items to the partners to be calculated in accordance

with a settlement agreement dated May 20, 1993, entered into

between Walter J. Hoyt III, and respondent's Sacramento,
                               - 4 -


California, Appeals Office.   At trial, respondent submitted a

proposed decision document in each case and moved for summary

judgment.   If we find that respondent's method for


2
     Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue. All
Rule references are to the Tax Court Rules of Practice and
Procedure.


calculating the allocations is proper, then the parties agree

that the amounts shown on the proposed decision documents are

correct.

     This Court had previously considered the tax consequences of

the Hoyt family cattle breeding operations in Bales v.

Commissioner, T.C. Memo. 1989-568.     As a result of our opinion in

Bales v. Commissioner, supra, on May 20, 1993, Walter J. Hoyt

III, the general partner and tax matters partner, entered into

the settlement with respondent's Sacramento, California, Appeals

Office, setting forth the basis for settling all Hoyt cattle

partnership cases for the taxable years 1980 through 1986.

                         FINDINGS OF FACT

     Some of the facts have been stipulated and are so found.

The stipulation of facts and the exhibits received into evidence

are incorporated by this reference.

     All the partnerships are limited partnerships formed to

engage in the business of cattle breeding.    The partnerships were
                                - 5 -


organized under the laws of the States of California and Nevada.

The limited partners obtained interests in the partnerships by

executing subscription agreements.

     The partnerships purchased the cattle used in their breeding

operations from Hoyt & Sons Ranches (Ranches).    In payment for

the cattle purchased, the partnerships executed promissory notes

to Ranches.    Thereafter, the partners signed assumption of

liability agreements, thereby assuming personal liability for




these recourse partnership liabilities.    Principal payments on

the notes became due starting in the sixth year after the notes

were executed.

     Pursuant to the settlement agreement (the agreement), the

numbers of cattle deemed to be held by the partnerships were

reduced.    Accordingly, the amount of principal on each of the

notes payable to Ranches was treated as reduced.    The agreement

provides that this new principal amount is the amount of

partnership debt to be treated as personally assumed by the

partners.

     The agreement further provides:

     Each partner's profit and loss sharing percentage is
     determined annually by comparing the partner's capital
     account to the aggregate of the capital accounts of all
     partners in the partnership. This determination is made
     based on the total capital owned, not the total capital
     originally subscribed.
                               - 6 -


               *     *    *    *       *   *   *

     The amount of liabilities assumed personally by the partners
     during the first year of the partnership will be based on
     original subscription agreements, and will be provided by
     Walter J. Hoyt within one week after the partnership
     spreadsheet is submitted to him for review and/or
     correction.

               *     *    *    *       *   *   *

     All partners who originally assumed personal liability for a
     portion of the partnership debt during the first year of the
     partnership -- whether they are now determined to be active
     or inactive partners -- will be assigned a share of the
     lower amount of recognized partnership debt described above.
     Each partner's share will be the exact same percentage as
     his/her share of the partnership debt originally assumed.

     The agreement defines active partners as those who continue

to honor their obligations to Ranches and continue to participate

in the partnership and inactive partners as those who have walked

away from their note obligations and/or no longer participate in

the partnership.

     As an alternative, respondent made a settlement offer to the

partners on an individual basis.   The terms of the offer provided

generally that a partner who accepted would be allowed a

deduction for any cash paid to the "Hoyt Organization" in the

year of payment.   The partner would not be allowed any other

deductions or credits nor be required to recognize any income

related to the partnerships.   The record does not indicate how

many partners accepted this settlement offer (referred to as the

out-of-pocket settlement).

     Respondent's spreadsheets calculating the partners'
                                - 7 -


interests in the partnerships have been stipulated and have been

received into evidence.   For the first year, respondent allocated

a portion of the partnership debt, which consisted of the reduced

amount of the notes to Ranches, to each of the partners who

assumed personal liability.    The allocation was based on the

original percentages of partnership liabilities assumed as

reflected in the partnership books and records.    The resulting

amounts represented each partner's beginning capital account

balance.   Each year respondent adjusted these balances for actual

capital contributions made to the partnership and increases and

decreases in liabilities assumed.    These adjusted balances were

used to determine the proportionate share of partnership items to

be allocated to each partner.    The capital account balances were

then adjusted to reflect the partnership items so allocated and

these balances were carried over to the next year.

     All of the partners included in respondent's proposed

decision documents had personally assumed partnership liabilities

as reflected in the partnership books and records and on the

Federal income tax returns filed by the partnerships throughout

the taxable years at issue.    Furthermore, petitioner agrees that

respondent's calculations are consistent with the books and

records of the partnerships.

     Several documents relating to one of the partnerships,

Shorthorn Genetic Engineering 1984-5, have also been stipulated
                               - 8 -


and received into evidence.   The partnership was organized as a

limited partnership under the laws of the State of California.

The partnership agreement was filed with the Office of the

Secretary of State for California on July 18, 1984.

     The partnership agreement provides in pertinent part:

     Look-back Provision. * * * Due to the uncertainties of the
     cattle breeding business, the ability of all Limited
     Partners to meet their obligations under this Agreement and
     any other unforeseen future events the General Partner will
     require a certain flexibility in conducting the financial
     affairs and establishing the business of the Partnership.
     Therefore, it is mutually agreed that such Partners[']
     permanent pro rata share of Partnership capital, income,
     losses, credits, and distributions will be determined on
     December 31, 1988 and at the end of the Investment Period.

     Each Partner will be liable to return cash to the
     Partnership, without interest, to the extent necessary, to
     equalize the amount of loss, gain, distributions and credits
     that exceed the amount that is determined to be their [sic]
     correct share of these items at the end of the investment
     period.


               *    *    *     *       *   *   *

     Remedies. The right to expel any Limited Partner who may
     fail of use [sic] to pay into the capital of the Partnership
     any portion of his subscription within thirty (30) days
     after its due date, or who may attempt to participate in or
     interfere in any way with the management of the
     Partnership's affairs, is hereby expressly reserved to the
     General Partner in his sole discretion. * * * The defaulting
     Limited Partner may be expelled from the Partnership in
     which case he will be entitled to the amount in his capital
     account, determined on a cash basis, as of the end of the
     [preceding] fiscal year after deduction therefrom for any
     amount dues and owing to the Partnership for any unpaid
     assessments of the expelled Limited Partner, and for each
     succeeding assessment as it becomes due.

     A Limited Partner who defaults or voluntarily withdraws from
     the Partnership will be entitled to the amount in his
                                - 9 -


     capital account, only upon complete liquidation of all
     Partnership assets, less any amount of future unpaid
     assessments.

     The partnership agreement was amended in February 1987.

Under the amended agreement, Shorthorn Genetic Engineering 1984-5

was reformed as Shorthorn Genetic Engineering 1984-5, J.V., and

the partnership was to operate as a general partnership under the

laws of the State of Nevada.

                               OPINION

     Given the disposition of the issue on the merits discussed

below, we do not find it necessary to address respondent's

motions for summary judgment, and they will be denied.

     When a petition for readjustment of partnership items has

been filed properly, this Court has jurisdiction to decide all of

the partnership items of the partnership and the proper

allocation of these items to the partners for the partnership

taxable year at issue.   Sec. 6226(f).      Partnership items are

those items required to be taken into account for the

partnership's taxable year under subtitle A which are to the

extent provided by the regulations "more appropriately determined

at the partnership level than at the partner level."       Sec.

6231(a)(3).   The regulations provide that such items include:

          (1) The partnership aggregate and each partner's share
     of each of the following:
           (i) Items of income, gain, loss, deduction, or credit
     of the partnership;

                *    *    *     *       *    *    *
                                   - 10 -


          (v) Partnership liabilities (including determinations
     with respect to the amount of the liabilities, whether the
     liabilities are nonrecourse, and changes from the preceding
     taxable year); and

                *       *      *    *    *      *    *

          (4) Items relating to the following transactions, to
     the extent that a determination of such items can be made
     from determinations that the partnership is required to make
     with respect to an amount, the character of an amount, or
     the percentage interest of a partner in the partnership, for
     purposes of the partnership books and records or for
     purposes of furnishing information to a partner:
          (i) Contributions to the partnership;
          (ii) Distributions from the partnership; and
          (iii) Transactions to which section 707(a) applies
     (including the application of section 707(b)).

Sec. 301.6231(a)(3)-1(a), Proced. & Admin. Regs.

     All partners who held an interest in the partnership for the

taxable year at issue generally will be treated as parties to a

partnership action.     Sec. 6226(c).       However, a partner is not a

party if he or she does not have an interest in the outcome of

the proceeding because such partner's partnership items have

become nonpartnership items pursuant to subsection (b) of section

6231.   Sec. 6226(d).       A partner's partnership items will be

treated as nonpartnership items as of the date on which the

partner enters into a settlement agreement with the respondent

with respect to such items.        Sec. 6231(b)(1)(C).   The

classification of items as partnership or nonpartnership items is

significant because the audit and litigation procedures provided

in sections 6221 through 6230 apply to partnership items.

Nonpartnership items are subject to the rules for judicial and
                                - 11 -


administrative resolution of the partner's tax liability and

cannot be the subject of a partnership proceeding.    See, e.g.,

Maxwell v. Commissioner, 87 T.C. 783, 788-789 (1986).

     Petitioner has made various arguments based on an assumption

that respondent included partners who have accepted the out-of-

pocket settlement in her calculations on which the proposed

decision documents are based.    Petitioner bears the burden of

proof in these cases.   Rule 142.   We begin by noting that there

is no evidence in the record concerning partners who have

accepted the out-of-pocket settlement.    Therefore, we have no

indication that any such partners were included in respondent's

calculations.   We will, however, further address petitioner's

arguments.

     Petitioner argues that the partnership income, losses,

credits, and liabilities calculated pursuant to the settlement

agreement should be allocated to a limited group of partners.

Petitioner contends that any partners who have accepted the out-

of-pocket settlement offer from respondent are not parties to

this proceeding pursuant to section 6226.    Therefore, petitioner

argues, the Court is prohibited from allocating partnership items

to those partners because we do not have jurisdiction to do so.

Petitioner also argues that pursuant to section 6231, the

partnership items of the partners who have accepted the out-of-

pocket settlement have been converted to nonpartnership items.
                               - 12 -


As a result, petitioner argues that these partners have no

partnership interest.

     Respondent argues that the Court has jurisdiction to

determine the allocation of items at issue in these cases because

the items are partnership items.    Respondent contends that in

order to determine the allocations to be made to the partners who

have not settled on an individual basis, it is necessary for the

Court to consider the capital accounts of all of the partners.

Respondent argues that the provisions of the Tax Equity and

Fiscal Responsibility Act of 1982, Pub. L. 97-248, sec. 402(a),

96 Stat. 324, 648 are procedural, and affect only the type of

proceeding which may be brought, but do not alter the substantive

law of partnerships.    Thus, respondent argues, the provisions do

not have the effect of removing partners from the partnership.

     The items at issue fall within the definition of partnership

items.   The determination of the allocation of partnership items

to the parties to this action requires that we consider the

partnership aggregate of each item, including partnership

capital.   A partner's interest in each item is determined based

on the share of total partnership capital contributed by the

partner.

     The effect of a partner's accepting the out-of-pocket

settlement is that the partner and respondent have agreed on the

treatment of the partner's share of partnership items for Federal
                               - 13 -


tax purposes.   Under sections 6226 and 6231, such partner is not

a party to this partnership action and is not bound by our

determinations.   However, the partner is still a party to the

partnership agreement and retains his interest as partner in the

partnership.    Thus, the allocations of partnership items must be

computed by including the interests of all partners, including

any who have accepted the out-of-pocket settlement.

     Petitioner also contends that by the terms of the

partnership agreement, the tax matters partner has the authority

to accept the out-of-pocket settlement on behalf of individual

partners, that he has exercised such authority with respect to

certain partners, and that these partners are no longer parties

to this action.   Because we have held that the status of the

partners with respect to these cases does not affect our

jurisdiction to determine the allocation of the partnership items

above, we find no merit in this argument.

     In the alternative, petitioner argues that the proper

interpretation of the agreement supports his contention that the

partnership items should be allocated to a limited number of

partners.

     A settlement agreement between respondent and a tax matters

partner related to the determination of partnership items for any

partnership taxable year is binding on the parties to the

agreement with respect to the determination of partnership items
                              - 14 -


for such taxable year unless there is a showing of fraud,

malfeasance, or misrepresentation of fact.    Sec. 6224(c).   A

mistake of fact or law is not grounds for rescinding an agreement

under section 6224.   Korff v. Commissioner, T.C. Memo. 1993-33.

The proper meaning of the terms of an agreement is determined

from language of the agreement and the circumstances surrounding

its execution.   Robbins Tire & Rubber Co. v. Commissioner, 52

T.C. 420, 435-436 (1969).

     First, petitioner asserts, on brief, that the Tax Matters

Partner believed that, pursuant to the Code provisions, partners

who settled on an individual basis should be excluded from

allocations to be determined under the agreement because such

partners are no longer parties to this action.

     Respondent argues that even assuming that the Tax Matters

Partner believed the calculations under the agreement would be

made by applying its provisions only to the partners who are

parties to this action, such belief is a mistake of law, and thus

it does not preclude enforcement of the agreement.

     Assertions made in briefs do not constitute evidence.     Rule

143(b).   There is no evidence on the record to support

petitioner's assertion as to the belief of the Tax Matters

Partner at the time the agreement was made.    Further, we agree

with respondent that the Tax Matters Partner's asserted belief is

mistaken, and, whether the mistake is of law or fact, it does not
                                - 15 -


preclude enforcement of the agreement.

     In the alternative, petitioner argues that by its terms the

agreement does not apply to partners who have settled with the

respondent on an individual basis.       Petitioner relies on the

following language:   "The primary purpose of this memorandum is

to memorialize the bases we reached for settling all cases

involving Hoyt partnerships for the years 1980 through 1986."

Petitioner argues that the agreement therefore has no relevance

for partners who are not parties to this action.

     Again, we note, that there is no evidence in the record

concerning the extent to which respondent's calculations include

partners who have accepted the out-of-pocket settlement.       In any

event, we find that the language of the agreement providing for

the calculation of the allocations of partnership liabilities and

other items to the partners is clear.       Each section refers to

"the partners" or "all partners".    Therefore, we find that

inclusion of all partners in the calculations is appropriate.

     In the alternative, petitioner argues that the terms of the

partnership agreements control these allocations, and

respondent's calculations are inconsistent with the requirements

of the partnership agreements.    Petitioner contends that the

provisions of the partnership agreements require that partnership

items be reallocated in accordance with the partner's real

interests in the partnership.    Petitioner argues that the
                              - 16 -


allocations of partnership items are to be made pursuant to the

partnership agreements under section 704(a).    Petitioner asserts

that certain partners defaulted on the notes to Ranches.

Petitioner contends that under the terms of the partnership

agreement the interests of these partners have been terminated.

Petitioner also contends that under the partnership agreement the

defaulting partners are to be treated as having never assumed

these obligations, and, therefore, they should not be allocated

any share of the partnership liabilities under the agreement.

     Petitioner's contentions are not supported by the evidence

in the record.   Petitioner has not produced any evidence that any

partners defaulted on the notes.

     Even if we were to find that partners defaulted on the

notes, the original partnership agreement for Shorthorn Genetics

Engineering 1984-5 does not support petitioner's argument.    The

partnership agreement contains a "look-back" provision, under

which allocations of income, losses, and other items may be made

to the partners' capital accounts at the end of the partnership's

fifth year to adjust the prior allocations.    For this

partnership, these adjustments would not occur until sometime in

1989, after the taxable years at issue.   We do not read this

provision to provide that the partners never assumed the

liability or to provide for retroactive allocations to prior

years.   In addition, the partnership agreement does not provide
                              - 17 -


that a limited partner may be expelled for defaulting on

partnership obligations, much less that an expulsion would be

retroactive to the beginning of the partnership.

     Moreover, the settlement agreement expressly provides for

the inclusion of partners who default on their note obligations

to Ranches (inactive partners) in the original allocations of the

partnership debt.   The agreement is binding on the parties.    Sec.

6224.

     Petitioner also makes the following secondary arguments:

(1) Various partners, by their actions or inactions, failed to

abide by the provisions of the amended partnership agreement;

therefore their interests have been terminated; (2) a large

number of partners defaulted on the notes to Ranches in 1987, and

their cattle have been repossessed; therefore these partners

should not be allocated any partnership debt; and (3) certain

partners terminated their interests in 1994 by letters alleging

that the partnerships were terminated shortly after inception.

     Respondent objected to any evidence of these purported

actions or inactions as irrelevant because they were subsequent

to the taxable years at issue.

     Evidence is relevant if it tends to make the existence of

any fact that is of consequence to the determination of the

action more probable or less probable than it would be without

the evidence.   Fed. R. Evid. 401.   Petitioner proffered evidence
                              - 18 -


of various livestock exhibitions, sales, and programs, letter

writing campaigns from 1992 through 1994, and a management

agreement between Shorthorn Genetic Engineering 1983 #3 and W.J.

Hoyt Sons Management Co., Ltd., for years beginning with 1993, as

well as termination of interest letters from partners written in

1994.   Petitioner has provided no explanation of the relevance of

these documents to the taxable years at issue.    The evidence does

not tend to show that any partners withdrew from or had their

interests in any of the partnerships terminated during the

taxable years at issue.   Respondent's objection is sustained.

     The only evidence in the record that any cattle were

repossessed is petitioner's own general testimony that cattle

were repossessed.   Even if we believed that the cattle were

repossessed by Ranches, the repossession occurred after the

taxable years at issue, and is not relevant to these cases.

     To reflect the foregoing,


                                 An appropriate order and decision

                          will be entered in each case.
                                                                  APPENDIX


                                                                      Taxable                             Adjusgment
                                                                       Year     Investment   Ordinary            Separately Stated
Docket No.   Partnership                                              Ending    Tax Credit   Income               Partnership Items

22003-89     Shorthorn Genetic Engineering 1982-2, Ltd.              12/31/84       $0       $1,192,432                  $8,000
             Shorthorn Genetic Engineering 1982-4, Ltd.              12/31/84        0        1,273,246                  14,000
             Shorthorn Genetic Engineering 1982-5, Ltd.              12/31/84        0        1,105,768                   8,000

22008-89     Shorthorn Genetic Engineering 1982-2, Ltd.              12/31/83        0        1,539,763                       0
             Shorthorn Genetic Engineering 1982-4, Ltd.              12/31/83        0        1,668,131                   8,800
             Shorthorn Genetic Engineering 1982-5, Ltd.              12/31/83        0        1,397,701                  18,870

22069-89     Shorthorn   Genetic   Engineering   1985-1,   Ltd.      12/31/85    6,246,500      962,586                       0
             Shorthorn   Genetic   Engineering   1985-2,   Ltd.      12/31/85    5,969,680    1,075,594                       0
             Shorthorn   Genetic   Engineering   1985-3,   Ltd.      12/31/85    6,391,500      934,926                       0
             Shorthorn   Genetic   Engineering   1985-4,   Ltd.      12/31/85    6,060,480    1,152,251                       0
             Shorthorn   Genetic   Engineering   1985-5,   Ltd.      12/31/85    7,462,320    1,389,232                       0
             Shorthorn   Genetic   Engineering   1982-2,   Ltd.      12/31/85         0         491,350                  20,000
             Shorthorn   Genetic   Engineering   1982-4,   Ltd.      12/31/85         0         588,902                  34,000
             Shorthorn   Genetic   Engineering   1982-5,   Ltd.      12/31/85         0         610,974                  12,000

22070-89     Durham   Genetic   Engineering   1985-1,   Ltd.         12/31/85    5,479,920      982,748                       0
             Durham   Genetic   Engineering   1985-2,   Ltd.         12/31/85    4,389,600      847,560                       0
             Durham   Genetic   Engineering   1985-3,   Ltd.         12/31/85    9,274,800    1,422,744                       0
             Durham   Genetic   Engineering   1985-4,   Ltd.         12/31/85    6,485,280    1,107,882                       0
             Durham   Genetic   Engineering   1985-5,   Ltd.         12/31/85    4,701,120      819,308                       0

24514-89     Shorthorn Genetic Engineering 1984-3, Ltd.              12/31/84    5,200,000      889,250                       0
             Shorthorn Genetic Engineering 1984-3, Ltd.              12/31/85         0       1,254,722
                                                                                 5,200,000

27641-89     Timeshare Breeding Service 1984-4, Ltd.                 12/31/84    5,200,000      951,000                       0
             Timeshare Breeding Service 1984-4, Ltd.                 12/31/85         0       1,275,290                       0

27675-89     Shorthorn   Genetic   Engineering   1984-1,   Ltd.      12/31/84    5,200,000      765,750                       0
             Shorthorn   Genetic   Engineering   1984-5,   Ltd.      12/31/84    5,200,000      765,750                       0
             Shorthorn   Genetic   Engineering   1984-1,   Ltd.      12/31/85         0       1,299,676                   8,000
             Shorthorn   Genetic   Engineering   1984-5,   Ltd.      12/31/85         0       1,105,527                   8,000
                                                                  APPENDIX



                                                                     Taxable                               Adjustments
                                                                       Year     Investment     Ordinary           Separately Stated
Docket No.   Partnership                                               Ending    Tax Credit     Income            Partnership Items

28383-89     Shorthorn   Genetic   Engineering   1982-3,   Ltd.      12/31/83           $0    $1,677,664                  $2,275
             Shorthorn   Genetic   Engineering   1982-3,   Ltd.      12/31/84            0     1,278,581                  22,000
             Shorthorn   Genetic   Engineering   1983-1,   Ltd.      12/31/84            0     1,332,207                   6,000
             Shorthorn   Genetic   Engineering   1982-3,   Ltd.      12/31/85            0       657,916                  30,000
             Shorthorn   Genetic   Engineering   1983-1,   Ltd.      12/31/85            0     1,163,251                  12,000

28384-89     Shorthorn Genetic Engineering 1983-1, Ltd.              12/31/83    5,375,500       863,839                       0

28491-89     Timeshare Breeding Service 1983-2, Ltd.                 12/31/85            0     1,474,911                  18,000
             Timeshare Breeding Service 1983-3, Ltd.                 12/31/85            0     1,409,266                  38,000

             Timeshare Breeding Service 1984-1, Ltd.                 12/31/85            0     1,345,359                   4,000
             Timeshare Breeding Service 1984-2, Ltd.                 12/31/85            0     1,372,156                   6,000
             Timeshare Breeding Service 1984-3, Ltd.                 12/31/85            0     1,659,972                   4,000

28492-89     Timeshare Breeding Service 1983-2, Ltd.                 12/31/84            0     1,199,786                   8,000
             Timeshare Breeding Service 1983-3, Ltd.                 12/31/84            0     1,081,335                  22,000

             Timeshare Breeding Service 1984-1, Ltd.                 12/31/84    5,200,000       827,500                       0
             Timeshare Breeding Service 1984-2, Ltd.                 12/31/84    5,200,000       827,500                       0
             Timeshare Breeding Service 1984-3, Ltd.                 12/31/84    5,200,000       889,250                       0

29260-89     Shorthorn Genetic Engineering 1983-2, Ltd.              12/31/84            0     1,272,528                   2,000
             Shorthorn Genetic Engineering 1982-1, Ltd.              12/31/84            0     1,463,151                  13,375
             Shorthorn Genetic Engineering 1984-4, Ltd.              12/31/84    5,200,000       827,500                       0

29295-89     Shorthorn   Genetic   Engineering   1983-3,   Ltd.      12/31/85            0     1,187,892                  14,000
             Shorthorn   Genetic   Engineering   1984-2,   Ltd.      12/31/85            0     1,158,004                   6,000
             Shorthorn   Genetic   Engineering   1983-2,   Ltd.      12/31/85            0     1,244,886                   6,000
             Shorthorn   Genetic   Engineering   1982-1,   Ltd.      12/31/85            0       468,089                  16,000
             Shorthorn   Genetic   Engineering   1984-4,   Ltd.      12/31/85            0     1,059,134                   4,000

29854-89     Shorthorn Genetic Engineering 1983-2, Ltd.              12/31/83    5,573,520       794,227                       0

29855-89     Shorthorn Genetic Engineering 1983-3, Ltd.              12/31/83    5,285,200       753,141                       0

29856-89     Shorthorn Genetic Engineering 1983-3, Ltd.              12/31/84            0     1,105,753                       0

30478-89     Shorthorn Genetic Engineering 1982-1, Ltd.              12/31/83            0     1,541,874                       0
                                                                  APPENDIX



                                                                     Taxable                              Adjustments
                                                                      Year      Investment    Ordinary          Separately Stated
Docket No.   Partnership                                              Ending     Tax Credit     Income          Partnership Items

30479-89     Timeshare Breeding Service No. 2, Ltd.                  12/31/83    $4,991,310    $711,266                     $0
             Timeshare Breeding Service No. 3, Ltd.                  12/31/83     5,220,500     951,333                      0

20224-90     Shorthorn   Genetic   Engineering   1982-1,   Ltd.      12/31/86             0     704,520                 34,000
             Shorthorn   Genetic   Engineering   1982-2,   Ltd.      12/31/86             0     855,815                 48,000
             Shorthorn   Genetic   Engineering   1982-3,   Ltd.      12/31/86             0     592,481                 46,000
             Shorthorn   Genetic   Engineering   1982-4,   Ltd.      12/31/86             0     674,526                 48,000
             Shorthorn   Genetic   Engineering   1982-5,   Ltd.      12/31/86             0     649,845                 28,000

21463-90     Shorthorn   Genetic   Engineering   1983-1,   Ltd.      12/31/86             0   1,993,884                 28,000
             Shorthorn   Genetic   Engineering   1983-2,   Ltd.      12/31/86             0   1,851,391                 30,000
             Shorthorn   Genetic   Engineering   1983-3,   Ltd.      12/31/86             0   1,909,028                 30,000
             Shorthorn   Genetic   Engineering   1984-1,   Ltd.      12/31/86             0   1,778,928                 36,000
             Shorthorn   Genetic   Engineering   1984-2,   Ltd.      12/31/86             0   1,759,660                 32,000
             Shorthorn   Genetic   Engineering   1984-3,   Ltd.      12/31/86             0   1,634,580                 28,000
             Shorthorn   Genetic   Engineering   1984-4,   Ltd.      12/31/86             0   1,372,240                 30,000
             Shorthorn   Genetic   Engineering   1984-5,   Ltd.      12/31/86             0   1,741,354                 28,000

21954-90     Shorthorn   Genetic   Engineering   1985-1,   Ltd.      12/31/86             0   1,856,560                 60,000
             Shorthorn   Genetic   Engineering   1985-2,   Ltd.      12/31/86             0   1,880,776                 30,000
             Shorthorn   Genetic   Engineering   1985-3,   Ltd.      12/31/86             0   1,832,344                 42,000
             Shorthorn   Genetic   Engineering   1985-4,   Ltd.      12/31/86             0   1,777,639                 30,000
             Shorthorn   Genetic   Engineering   1985-5,   Ltd.      12/31/86             0   2,110,828                 42,000

23531-90     Durham   Genetic   Engineering   1983-2,   Ltd.         12/31/86             0   1,392,420                 84,000
             Durham   Genetic   Engineering   1983-3,   Ltd.         12/31/86             0   2,005,892                 34,000
             Durham   Genetic   Engineering   1984-1,   Ltd.         12/31/86             0   1,515,518                 66,000
             Durham   Genetic   Engineering   1984-2,   Ltd.         12/31/86             0   1,917,100                 48,000
             Durham   Genetic   Engineering   1984-3,   Ltd.         12/31/86             0   1,275,376                 44,000
             Durham   Genetic   Engineering   1984-4,   Ltd.         12/31/86             0   1,570,744                 14,000

28577-90     Durham   Genetic   Engineering   1985-1,   Ltd.         12/31/86             0   1,749,607                 40,000
             Durham   Genetic   Engineering   1985-2,   Ltd.         12/31/86             0   1,465,068                 28,000
             Durham   Genetic   Engineering   1985-3,   Ltd.         12/31/86             0   2,860,513                 56,000
             Durham   Genetic   Engineering   1985-4,   Ltd.         12/31/86             0   1,773,822                 40,000
             Durham   Genetic   Engineering   1985-5,   Ltd.         12/31/86             0   1,503,411                 26,000
