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Turtleback I at the end of the R & D period, it would have the
opportunity to exercise that option only if HJI decided that it
would be uneconomical to enter into the Turtleback Jojoba Venture
with JDP. As we stated previously, there is no evidence that JDP
would have had the technical expertise or financial resources to
operate a jojoba plantation had HJI not exercised its option to
enter into Turtleback Jojoba Venture. There is no evidence that
Berberich or any limited partner could or would have stepped in
to operate a commercial jojoba plantation on Turtleback I
commencing in 1987. Neither JDP nor any of its partners had any
experience in farming jojoba. JDP, moreover, had no employees,
equipment, or any other physical assets, and apparently would not
have had sufficient funds to acquire the necessary assets to
operate a jojoba plantation after the 5 to 6 years needed for the
jojoba plants to become productive. JDP, moreover, was allocated
only 60 acres on which to operate such plantation, which, from
the evidence in this case, was insufficient acreage on which to
conduct such an operation.
Under such circumstances, we conclude that at the time the R
& D Agreement was executed, JDP did not intend to engage in a
business of its own. Because of this conclusion, we do not
address alternative arguments raised by the parties in support of
their various positions.
Accordingly, we hold that petitioners are not entitled to
deduct losses attributable to JDP's deduction for research or
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