- 5 -
Thus, petitioner reported total income of $79,035 and a total tax
liability of $11,524.
Blythe I was audited by the Internal Revenue Service, and a
Notice of Final Partnership Administrative Adjustment was issued
to the partnership. The partnership initiated a TEFRA proceeding
in this Court, and a decision was entered in Utah Jojoba I
Research v. Commissioner, T.C. Memo. 1998-6, which involved a
similar jojoba investment program.3 In the decided case, this
Court held that the partnerships4 did not directly or indirectly
engage in research or experimentation and that the partnerships
lacked a realistic prospect of entering into a trade or business.
In upholding respondent's disallowance of research and
experimental expenditures, the Court found that the agreements
between the partnerships and the proposed research and
development contractor, U.S. Agri Research & Development Corp.
(U.S. Agri), had been designed and entered into solely to provide
a mechanism to disguise the capital contributions of limited
partners as currently deductible expenditures. The Court stated
that the activities of the partnerships were "another example of
efforts by promoters and investors in the early 1980's to reduce
3 The tax matters partner of Blythe I signed a
stipulation to be bound by the outcome of Utah Jojoba I Research
v. Commissioner, T.C. Memo. 1998-6.
4 Eighteen docketed cases were bound by stipulation by
the outcome of Utah Jojoba I Research v. Commissioner, supra.
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