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to the total amount petitioners actually paid in connection with
their partnership interest.
The offering identified Mr. Matsuda, who was petitioner
wife's father and a promoter of the partnership, as the general
partner of Jojoba Hawaii and U.S. Agri as the contractor for the
R & D program under an R & D agreement. Additionally, a license
agreement between Jojoba Hawaii and U.S. Agri granted U.S. Agri
the exclusive right to utilize technology developed for Jojoba
Hawaii for 40 years in exchange for a royalty of 85 percent of
gross sales of all products produced. The offering included
copies of both the R & D agreement and the license agreement.
Following close examination of these documents, as well as
various other items of evidence, this Court held in Utah Jojoba I
Research v. Commissioner, T.C. Memo. 1998-6, that 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
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