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general partners of Yuma Mesa, and Woodburn was TMP.5 No
investments in Yuma Mesa were made prior to December 31, 1982,
and no activity, other than document execution, concerning Yuma
Mesa occurred during 1982. The parties have stipulated that Yuma
Mesa began business on December 31, 1982. Using the accrual
method of accounting and an election under section 174, Yuma Mesa
deducted $1,298,031 as research and development expenses for the
taxable year ending on December 31, 1982. However, no activity
under the research and development agreement occurred prior to
December 31, 1982.
In 1982, Woodburn and Sullivan were partners in the law firm
of Woodburn and Sullivan located in Dallas, Texas. Sometime in
1982, one of the principals of the accounting firm Meinke, Damer,
and Peterson6 (Meinke firm) approached Sullivan or Woodburn
regarding the possibility of having both of them serve as the
general partners of a limited partnership with a described
purpose of conducting research and development of the jojoba
plant and its product, the jojoba nut (or bean). Sullivan and
Ray Meinke (Meinke), had known each other since Sullivan's
graduation from law school in 1963. Over the years, they
5 William Woodburn retired in 1985 for health reasons and
resided in Hawaii at the time of trial. His co-general partner,
G. Dennis Sullivan (Sullivan), testified at trial. Sullivan is a
party to these cases pursuant to sec. 6226(c) and (d).
6 The principals were Raymond Meinke (Meinke), Keith Damer
(Damer), and Marlin Peterson (Peterson).
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