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The facts pertinent to the instant case, relating to the
structure, formation, and operation of Utah I are as discussed in
Utah Jojoba I Research v. Commissioner, T.C. Memo. 1998-6. Utah
I was organized in December 1982 as a limited partnership for the
described purpose of conducting research and development (R & D)
involving the jojoba plant. The offering, prepared by CFS and
dated November 10, 1982, provided for a maximum capitalization of
$2,968,000 consisting of 350 limited partnership units at $8,480
per unit. Each unit required a cash downpayment of $2,500 and a
noninterest-bearing promissory note in the principal amount of
$5,980 payable in 10 annual installments with an acceleration
provision in the event of default. The offering was limited to
investors with a net worth (exclusive of home, furnishings, and
automobiles) of $150,000, or investors whose net worth was
$50,000 (exclusive of home, furnishings, and automobiles), and
who anticipated that, for the taxable year of the investment,
they would have gross income equal to $65,000, or taxable income,
a portion of which, but for tax-advantaged investments, would be
subject to a Federal income tax rate of 50 percent. Each limited
partner also was required to execute a limited guaranty agreement
in which he or she guaranteed a proportionate share of
partnership debt to U.S. Agri.
Petitioner's investment was for four limited partnership
units, which required an initial down payment of $10,000 and
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