Utah Jojoba I Research, William G. Kellen, Tax Matters Partner - Page 16

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          actually grow into superior plants that then could be sold to                
          other growers.  However, none of the work done in the laboratory             
          or greenhouse was specifically designated for Utah I.  U.S. Agri             
          did not allocate any of its losses from its laboratory and                   
          greenhouse operations to Utah I.                                             
               U.S. Agri's failure to develop a successful technique for               
          hardening off the jojoba plants cultured in the laboratory and               
          passage of the Tax Reform Act of 1986 forced Pace to close U.S.              
          Agri's laboratory and greenhouse in October or November 1987.                
          As a result, the 400 acres of land that U.S. Agri allegedly had              
          allocated to research and development, including the land                    
          allocated to Utah I, was added to the 906 acres that U.S. Agri               
          already was operating as a commercial jojoba farming operation.              
              By 1991, U.S. Agri serviced 37 different limited                        
          partnerships that eventually merged into Jojoba Plantation Ltd.              
          Twelve of these limited partnerships were being serviced pursuant            
          to agreements similar to the agreement between Utah I and U.S.               
          Agri.                                                                        
               c.  The Research and Development Agreement                              
               U.S. Agri executed an exclusive R&D agreement with Utah I on            
          December 31, 1982, for the stated purpose of "conducting research            
          and experimentation on the jojoba plant and developing the                   
          technology resulting in the commercial cultivation of the jojoba             
          plant."  No other bids were considered for the role of prime                 





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