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subsequent section references are to the Internal Revenue Code in
effect for the year in issue.
Respondent determined that petitioners were liable for the
following additions to tax for taxable year 1982: $523 under
section 6653(a)(1); 50 percent of the interest due on an
underpayment of $10,460 under section 6653(a)(2); and $2,615
under section 6661. The issues for decision are: (1) Whether
petitioners are liable for additions to tax for negligence under
section 6653(a); and (2) whether petitioners are liable for the
addition to tax for a substantial understatement under section
6661. The issues in this case concern the participation of
petitioners as limited partners in the Utah Jojoba I Research
limited partnership (Utah I).
Some of the facts in this case have been stipulated and are
so found. Petitioners resided in Arvada, Colorado, at the time
they filed their petition.
In 1982, David Kessel (petitioner) was a pediatrician, and
Ira Kaye Kessel (Mrs. Kessel) was a registered nurse. In 1979 or
1980, petitioner was referred by another physician to Elroy Jones
(Mr. Jones) for his financial planning needs. Petitioners
believed that Mr. Jones was an independent certified financial
planner. During the times they made their investments,
petitioners did not know that Mr. Jones worked for Coordinated
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