Michael G. Harvey and Penny B. Harvey - Page 12




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          sale of an investment.  Rather, he was integrally involved in the           
          partnership, and consequently petitioners’ reliance on any advice           
          from him was not reasonable.                                                
               We are convinced that petitioner intended to make an actual            
          investment in Yuma Mesa and not merely derive a tax benefit                 
          therefrom.  Petitioner, for example, performed some investigation           
          into the potential of jojoba prior to investment, monitored the             
          investment after it was made, and made payments to the                      
          partnership in an amount greater than the tax benefits expected             
          to be derived.  We nevertheless find that petitioner was                    
          negligent within the meaning of section 6653(a) with respect to             
          taxable year 1982.  First, despite petitioner’s substantial                 
          business background in both academia and the business world, he             
          did not make any financial projections for the investment, and he           
          did little to investigate the investment beyond a limited inquiry           
          into the uses of and possible demand for jojoba.  Second,                   
          petitioner participated in an investment which was organized and            
          promoted by tax lawyers, and which involved warnings in the                 
          private placement memorandum concerning tax risks and the need to           
          obtain legal advice.  In addition, petitioner claimed a $23,174             
          ordinary loss for 1982, despite the fact that he had invested               
          only $9,782 in cash in the partnership via a subscription                   
          agreement dated December 30, 1982; such a disproportionate and              
          accelerated loss should also have alerted petitioner to the need            






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