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research and development expenses at the time he advised
petitioner about Utah I. These types of expenses would have
allowed petitioner certain tax benefits above and beyond what
would have been provided by an ordinary business deduction.
There is no evidence in the record to suggest that Mr. Salgo
conducted any independent investigation to determine whether the
specific research and development proposed to be conducted by or
on behalf of the partnership would have qualified for deductions
under section 174. The Court also finds it notable that Mr.
Salgo had no educational background or experience in the area of
agricultural pursuits in general, or jojoba plants in particular.
There is no evidence in the record to suggest that, even if
Mr. Salgo did advise petitioner to invest in Utah I, petitioner
ever questioned Mr. Salgo about the facts and/or legal analysis
upon which he based his recommendations. Further, the record is
devoid of any evidence that petitioner asked Mr. Salgo to explain
the Utah I investment to him, which would seem particularly
important given the fact that petitioner obviously did not
exhaustively review the offering himself.
The facts in this case are similar to those in Glassley v.
Commissioner, T.C. Memo. 1996-206, in which this Court found that
the taxpayers:
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