Michael E. and Johanna S. Davis - Page 17




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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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