- 5 -
employment, $31,417 from petitioner wife's employment, interest
income of $952, a State income tax refund of $1,490, a loss of
$3,468 from the commercial fishing activity, "other gains" of
$237, a net farm loss of $1,890, other income of $4,685, and a
net loss from Jojoba Hawaii of $1,205. Thus, petitioners
reported total income of $89,277 and a tax liability of $8,704.
Jojoba Hawaii was audited by the Internal Revenue Service,
and a Notice of Final Partnership Administrative Adjustment was
issued to the partnership. The partnership initiated a TEFRA
proceeding in this Court. A decision was thereafter entered in
Utah Jojoba I Research v. Commissioner, T.C. Memo. 1998-6, which
involved a similar jojoba investment program.4 In the decided
case, this Court held that the partnerships5 did not directly or
indirectly engage in research or experimentation and that the
partnerships lacked a realistic prospect of entering into a trade
or business. In upholding the Commissioner's disallowance of
research and experimental expenditures, the Court found that the
agreements between the partnerships and the proposed research and
development contractor, U.S. Agri Research & Development Corp.
(U.S. Agri), had been designed and entered into solely to provide
4 The tax matters partner of Jojoba Hawaii signed a
stipulation to be bound by the outcome of Utah Jojoba I Research
v. Commissioner, T.C. Memo. 1998-6.
5 Eighteen docketed cases were bound by stipulation by
the outcome of Utah Jojoba I Research v. Commissioner, supra.
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