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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 Jojoba
Hawaii was motivated primarily by the potential to earn a profit
but admit that the promise of tax deductions played a role in
their decision. Petitioners contend further that their reliance
on the advice of petitioner wife's father, Mr. Matsuda, should
absolve them of liability for the negligence penalty in this
case. Petitioners also argue that, taking into account their
experience and the nature of the investment in Jojoba Hawaii,
they exercised the due care that a reasonable and ordinarily
prudent person would have exercised under like circumstances.
For the reasons set forth below, the Court does not agree with
petitioners' contentions.
First, the principal flaw in the structure of Jojoba Hawaii
was evident from the face of the very documents included in the
offering. A reading of these documents illustrated that the
partnership would not be engaged, either directly or indirectly,
in the conduct of any research or experimentation, but, rather,
the partnership was merely a passive investor seeking royalty
returns pursuant to the licensing agreement.7 Any experienced
7 Indeed, as noted previously, the offering stated that
(continued...)
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