- 15 -
him. More importantly, because Mr. Moore had a personal profit
motive in selling this investment to clients, he had a conflict
of interest in advising petitioner to purchase the limited
partnership interests.6 The advice petitioner received from Mr.
Moore fails as a defense to negligence due to his lack of
competence to give such advice and the clear presence of a
conflict of interest. See Rybak v. Commissioner, 91 T.C. 524,
565 (1988). Petitioner's reliance on the advice of Mr. Moore was
unreasonable under the circumstances.
Outside of Mr. McDevitt and Mr. Moore, petitioner made no
other inquiry into the viability of this partnership's proposed
research and operations. The Court finds it notable that the
offering listed at least 15 "potential uses of jojoba nuts"; yet,
petitioner failed to explore the plausibility of any of those
potential uses. Some of the potential uses listed in the
offering were various lubricants for high-speed or high-
temperature machinery, cosmetics, shampoos and soaps, sunscreens,
pharmaceuticals, cooking oils, disinfectants, polishing waxes,
corrosion inhibitors, candles, animal feed supplements, and
fertilizer. Being a physician, it seems logical that petitioner
would have had some access to information about the commercial
6 Petitioner acknowledged in his testimony that he knew
Mr. Moore was receiving commissions for finding investors to
purchase the limited partnership interests.
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