- 17 -
reasonable and ordinarily prudent investor would have at least
attempted to make this type of inquiry under the circumstances.8
Petitioner was not a naive investor and should have
recognized the need for independent professional advice. See
LaVerne v. Commissioner, 94 T.C. 637, 652 (1990), affd. without
published opinion 956 F.2d 274 (9th Cir. 1992), affd. in part
without published opinion sub nom. Cowles v. Commissioner, 949
F.2d 401 (10th Cir. 1991); Glassley v. Commissioner, T.C. Memo.
1996-206. In fact, the offering cautioned that prospective
investors should not "construe this memorandum or any prior or
subsequent communications as constituting legal or tax advice"
and urged investors to "consult their own counsel as to all
matters concerning this investment." The offering was replete
with statements, including the cover page statement that "THIS
OFFERING INVOLVES A HIGH DEGREE OF RISK", warning of tax risks
involved with the investment and the highly speculative nature of
the commercial viability of the jojoba plant. The offering
contained inconsistent information, such as the statement on page
9 that the general partner "has limited experience in dealing in
8 Petitioner testified that, at the time of his
investment in Blythe I, he was aware of jojoba research being
conducted at the University of California at Riverside and the
University of Arizona at Tucson. Also, in Utah Jojoba I Research
v. Commissioner, T.C. Memo. 1998-6, the Court noted that there
were experimental jojoba plantations located at the University of
California at Riverside, of which the general partner of Blythe
I, Mr. Kellen, was aware.
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