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partners through large upfront deductions for expenditures that
were actually capital contributions. The Court concluded further
that the partnership was not involved in a trade or business and
had no realistic prospect of entering into a trade or business
with respect to any technology that was to be developed by U.S.
Agri.
Petitioner here contends that his investment in Blythe I was
motivated solely by the potential to earn a profit. Petitioner
contends further that his reliance on the advice of his certified
public accountant and tax attorney, Mr. McDevitt, should absolve
him of liability for the negligence penalty in this case.
Petitioner also argues that, taking into account his experience
and the nature of the investment in Blythe I, he exercised the
due care that a reasonable and ordinarily prudent person would
have exercised under like circumstances. For the reasons set
forth below, the Court does not agree with petitioner's
contentions.
First, the principal flaw in the structure of Blythe I was
evident from the face of the very documents included in the
offering. A reading of the R & D agreement and licensing
agreement, both of which were included as part of the offering,
plainly shows that the licensing agreement canceled or rendered
ineffective the R & D agreement because of the concurrent
execution of the two documents. Thus, the partnership was never
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