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investment. Petitioners felt reassured about the tax risks after
talking with Mr. Jones. They also were reassured after talking
with someone from CFS. Petitioners did not explain the substance
of the reassuring statements made by Mr. Jones or by CFS.
Petitioners did not discuss the investment with an attorney.
Although petitioner does not recall whether he had their
accountant review the private placement offering before making
the investment, petitioners did discuss the partnership with him
after making the investment.
On their joint 1982 Federal income tax return, petitioners
reported wages from petitioner’s medical practice of $123,455 and
losses of $20,919 from the Utah Jojoba I Research partnership.
The partnership was audited and a Notice of Final Partnership
Administrative Adjustment was issued to the partnership. The
partnership initiated a TEFRA proceeding to contest the matter.
The matter was resolved by Utah Jojoba I Research v.
Commissioner, T.C. Memo. 1998-6, which found that the activities
of the partnership did not constitute a trade or business and
that the agreements between the partnership and U.S. Agri
Research & Development Corp. (U.S. Agri) had been designed and
entered into solely to provide a mechanism to disguise the
capital contributions of limited partners as currently deductible
expenditures.
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