Thomas N. Carmena - Page 18




                                       - 18 -                                         

          agricultural background.  However, petitioner did not diligently            
          read the offering, nor did he make an effort to have the                    
          investment explained to him prior to committing to invest some              
          $33,000 in Utah I.                                                          
               The Court is mindful that the Court of Appeals for the Ninth           
          Circuit (Ninth Circuit), the court to which an appeal in this               
          case would lie, has held that experience and involvement of the             
          general partner and the lack of warning signs could reasonably              
          lead investors to believe they were entitled to deductions in               
          light of the undeveloped state of the law regarding section 174.            
          See Kantor v. Commissioner, 998 F.2d 1514 (9th Cir. 1993), affg.            
          in part and revg. in part T.C. Memo. 1990-380.  In its holding,             
          the Ninth Circuit explained that the Supreme Court's decision in            
          Snow v. Commissioner, 416 U.S. 500 (1974), left unclear the                 
          extent to which research must be "in connection with" a trade or            
          business for purposes of qualifying for an immediate deduction              
          under section 174.  However, in the instant case, the partnership           
          was neither engaged in a trade or business nor conducting                   
          research and development, either directly or indirectly.                    
          Additionally, the experience in jojoba research and development             
          of the general partner of Utah I, Mr. Kellen, was questionable,             
          at best, as evidenced by conflicting statements in the offering.            
          Also, it is apparent from the evidence presented in this case               
          that Mr. Kellen had minimal involvement in the partnership.                 





Page:  Previous  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  Next

Last modified: May 25, 2011