Cactus Wren Jojoba, Ltd., Cecil R. Almand, Tax Matters Partner - Page 20

                                                - 20 -                                                   
            the research, there would have been no consideration given to                                
            altering the climatic conditions at the plantation with wind                                 
            machines.  For a research project, Luna explained, the procedures                            
            and conditions would have been followed to a conclusion so that                              
            the researchers could learn from the outcome.  The attempt to                                
            obtain financing to purchase wind machines reflected an attempt                              
            to continue the commercial operation of the plantation as a                                  
            farming operation.                                                                           
                  Luna indicated that some of the projects or activities on                              
            the 130-acre tract farmed for Yuma Mesa during the period in                                 
            question might have been conducted as research activities.  The                              
            two areas of possible research activity were:  (1) Herbicide                                 
            testing; and (2) the effects of water conservation and fertilizer                            
            utilization on jojoba.  Luna estimated that of the 130 acres                                 
            available for research activities, activities that might have                                
            been conducted for research were only carried out on                                         
            approximately 14 acres.  The record does not establish whether                               
            the studies in question were conducted entirely on the land                                  
            devoted to operations for Yuma Mesa.  Yuma Mesa did not provide                              
            Luna with any documentation indicating amounts paid or costs                                 
            incurred by the partnership or its representatives for any of the                            
            studies.                                                                                     
                  In the report he prepared with respect to the Cactus Wren                              
            partnership, Luna concluded that the activities performed on the                             






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