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December 21, 1981, yet the offering was not terminated. Just
four more limited partnership units were sold between December 22
and December 28, 1981 (two full units and two one-half units),
for a total of nine full limited partnership units. Nonetheless,
Berberich proceeded to close the offering and to execute the
limited partnership agreement on December 31, 1981. The parties'
haste to close the offering and form the limited partnership by
yearend in contradiction to the express terms of the offering
circular leads us to conclude that the primary objective of the
transaction was to generate tax losses during the first year of
the partnership and thus reduce the cost of petitioners' capital
investment in a jojoba farming venture.
As for the R & D Agreement, Whittaker admitted at the trial
that there was no way HJI could undertake the research or
experimentation outlined in that agreement for $360,000. It is
quite clear from the record, moreover, that as of December 31,
1981, no specific research and development plan had been
formulated for the jojoba expected to be planted on Turtleback I.
In fact, the research or experimentation plan devised for
Turtleback I was not designed until 1983. Moreover, no cost
estimates were made for the putative research or experimentation
at the time the documents were executed, nor did an accounting
system exist to allocate costs to JDP for at least the first 2
years of the purported research and development period. We
conclude that the $360,000 contract fee was driven by the need to
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