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Petitioner did not consult an attorney or any independent
expert in the area of agriculture or jojoba plants regarding
whether jojoba oil or any other jojoba derivative had a
potentially lucrative commercial market. Petitioner,
nevertheless, invested in Utah I.
On his 1982 Federal income tax return, petitioner reported
wages of $168,000 from his medical practice, interest income of
$33,124, taxable dividend income of $6,934, and capital gains of
$6,659. Petitioner reported total net losses of $116,187 from
various partnerships and a parcel of rental real estate, of which
$20,919 represented the loss from Utah I. Thus, petitioner
reported total income of $103,830 and a total tax liability of
$26,438.
Utah I was audited by the Internal Revenue Service and a
Notice of Final Partnership Administrative Adjustment was issued
to the partnership. The partnership initiated a TEFRA proceeding
in this Court and a decision was entered in Utah Jojoba I
Research v. Commissioner, T.C. Memo. 1998-6. In the decided
case, this Court held that the partnership did not directly or
indirectly engage in research or experimentation and that the
partnership lacked a realistic prospect of entering into a trade
or business. In upholding respondent's disallowance of research
and experimental expenditures, the Court found that the
agreements between the partnership and the proposed research and
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