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development contractor, 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. The Court stated
that the activities of the partnership were "another example of
efforts by promoters and investors in the early 1980's to reduce
the cost of commencing and engaging in the farming of jojoba by
claiming, inaccurately, that capital expenditures in jojoba
plantations might be treated as research or experimental
expenditures for purposes of claiming deductions under section
174." Id.
As a result of Utah I's TEFRA proceeding, petitioner was
assessed a tax deficiency of $10,459 for 1982, plus interest.
Subsequently, respondent issued a notice of deficiency to
petitioner for 1982 for affected items, determining that
petitioner was liable for the additions to tax for negligence
under section 6653(a)(1) and (2), and a substantial
understatement of tax under section 6661 for 1982. These
additions to tax are the subject of the instant case.
The first issue is whether petitioner is liable for the
additions to tax for negligence under section 6653(a)(1) and (2)
for 1982. Section 6653(a)(1) imposes an addition to tax in an
amount equal to 5 percent of an underpayment of tax if any part
of the underpayment is due to negligence or intentional disregard
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