- 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 NextLast modified: May 25, 2011