Norman H. Fawson and Mary Jane B. Fawson - Page 4

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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           

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