Don L. and Lora Christensen - Page 11




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          partnership were not paid pursuant to a valid R & D agreement but           
          were passive investments in a farming venture under which the               
          investors' return, if any, was to be in the form of a royalty               
          pursuant to the licensing agreement.  Thus, as this Court held in           
          Utah Jojoba I Research v. Commissioner, T.C. Memo. 1998-6, the              
          partnership was never engaged in research or experimentation,               
          either directly or indirectly.  Moreover, this Court found in               
          Utah Jojoba I Research v. Commissioner, supra, that U.S. Agri's             
          attempts to farm jojoba commercially did not constitute research            
          and development, thereby concluding that the R & D agreement was            
          designed and entered into solely to decrease the cost of                    
          participation in the jojoba farming venture for the limited                 
          partners through large up-front deductions for expenditures that            
          were actually capital contributions.  The Court concluded further           
          that the partnership was not involved in a trade or business and            
          had no realistic prospect of entering into a trade or business              
          with respect to any technology that was to be developed by U.S.             
          Agri.                                                                       
               Petitioners here contend that their investment in Blythe II            
          was motivated solely by the potential to earn a profit.                     
          Petitioners contend further that their reliance on the advice of            
          their certified public accountant, Mr. Hulse, should absolve them           
          of liability for the negligence penalty in this case.                       
          Petitioners also argue that, taking into account their experience           





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