- 17 -
to review the offering, provide legal advice surrounding the
partnership, and explain the legal ramifications of the licensing
agreement canceling out the R & D agreement. A reasonable and
ordinarily prudent investor under the circumstances would have
consulted an attorney. Additionally, the Court does not believe
that petitioners would have experienced a great degree of
difficulty in contacting the agricultural department of a nearby
college or university or going to another reliable source to
inquire about the research and development of jojoba plants and
their potential commercial usage, if any. Again, a reasonable
and ordinarily prudent investor would have at least attempted to
make this type of inquiry under the circumstances.11
Petitioners were not naive investors and should have
recognized the need for independent professional advice. See
LaVerne v. Commissioner, 94 T.C. 637, 652 (1990), affd. without
published opinion 956 F.2d 274 (9th Cir. 1992), affd. in part
without published opinion sub nom. Cowles v. Commissioner, 949
F.2d 401 (10th Cir. 1991); Glassley v. Commissioner, supra. In
fact, the offering cautioned that prospective investors should
not "construe this memorandum or any prior or subsequent
communications as constituting legal or tax advice" and urged
11 In Utah Jojoba I Research v. Commissioner, supra, the
Court noted that there were experimental jojoba plantations
located at the University of California at Riverside, California,
of which the general partner of Blythe II, Mr. Kellen, was aware.
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