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research and development expenses at the time he advised
petitioners about Jojoba Hawaii. These types of expenses would
have allowed petitioners certain tax benefits above and beyond
what would have been provided by an ordinary business deduction.
There is no evidence in the record to suggest that Mr. Matsuda
conducted any independent investigation to determine whether the
specific research and development proposed to be conducted by or
on behalf of the partnership would have qualified for deductions
under section 174.
There is also no evidence in the record to suggest that
petitioners ever questioned Mr. Matsuda about the facts and/or
legal analysis upon which he based his recommendations. Further,
the record is devoid of any evidence that petitioners asked Mr.
Matsuda to explain the Jojoba Hawaii investment to them, which
would seem particularly important given the fact that petitioners
clearly did not carefully scrutinize the offering themselves.
The facts here are similar to those in Glassley v.
Commissioner, T.C. Memo. 1996-206, in which this Court found that
the taxpayers:
acted on their fascination with the idea of
participating in a jojoba farming venture and their
satisfaction with tax benefits of expensing their
investments, which were clear to them from the
promoter’s presentation. * * *
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