Gary D. Hansen Johnean F. Hansen v. Commissioner of Internal Revenue

Gary and Johnean Hansen (“Hansens”) appeal the judgment of the Tax Court in Hansen v. Commissioner, T.C.M. (RIA) 2004-269 (2004), upholding the Commissioner of Internal Revenue’s (“Commissioner”) imposition of a negligence penalty pursuant to I.R.C. § 6662(a) for claiming losses in 1991 from a cattle partnership in which they had invested. The Hansens claim error, asserting that the Tax Court ignored relevant facts, applied an improper negligence standard, and inadequately considered the Hansens’ own victimization as members of the partnership. We have jurisdiction pursuant to 26 U.S.C. § 7482 (a)(1) and affirm the Tax Court’s decision upholding the negligence penalty.

I.

The Hansens were partners in a total of six cattle-breeding and tax-shelter partnerships promoted and run by Walter J. Hoyt, III (“Hoyt”) from 1987 through 1996. In 1991, the Hansens claimed $32,306 in losses based on their participation in the Hoyt partnership Durham Shorthorn Breed Syndicate 1987-C (“DSBS87-C”). These losses, combined -with losses from other Hoyt partnerships, reduced the Hansens’ adjusted gross income (“AGI”) in 1991 from $70,266 to $17,471, thereby lowering the Hansens’ 1991 taxes from…