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neither engaged in a trade or business nor conducting research
and development, either directly or indirectly. Additionally,
the offering made clear that the general partner, Mr. Matsuda,
had no experience in jojoba research and development. Also, it
is apparent from the evidence presented that Mr. Matsuda had
minimal involvement in the partnership. Petitioners are
precluded from relying upon a "lack of warning" as a defense to
negligence when there is no evidence that a reasonable
investigation was ever made, and the offering materials contained
many warnings of the tax risks associated with the investment.
On this record, the Court finds that petitioners did not
exercise the due care of reasonable and ordinarily prudent
persons under the circumstances. Consequently, the Court holds
that petitioners are liable for the negligence additions to tax
under section 6653(a)(1) and (2) for each of the years at issue.
Respondent is sustained on this issue.
To the extent the Court has failed to address an argument of
petitioners herein, the Court concludes such argument is without
merit.
Reviewed and adopted as the report of the Small Tax Case
Division.
Decision will be entered
for respondent.
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