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reasonable and ordinarily prudent investor under the
circumstances would have consulted a tax adviser about the
propriety of deducting research and development expenses.
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.
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
investors to "consult their own counsel as to all matters
concerning this investment." The offering was replete with
statements, including the cover page statement that "THIS
OFFERING INVOLVES A HIGH DEGREE OF RISK", warning of tax risks
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