- 10 -
Petitioner did not read the prospectus carefully, and he thought
the cautionary language therein was standard. Petitioners did
not have any expertise in or knowledge of jojoba farming, and
they did not seek the advice of an expert in this area.
Petitioners did not investigate the bona fides of the
investment. It was only after the investment that petitioner
visited the plantation and the offices, but it seems he was
merely looking at the appearance of the locations to determine
whether they were reputable.
We do not find that petitioners are naive investors. They
invested in the stock market for a number of years, and they also
participated in limited partnerships several times. Petitioners
had total wages in excess of $100,000 for each year, and they
have not established that tax savings was not a motivating
factor. We conclude that if petitioners were looking to make a
long-term profit, they would have investigated the jojoba
investment more thoroughly because of the high risk and lack of a
market for the oil.
On the record before us, we find that petitioners were
negligent, and we sustain respondent’s determination.
Substantial Understatement of Tax
Respondent determined that petitioners were liable under
section 6661(a) for a substantial understatement of tax for 1982.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 Next
Last modified: May 25, 2011