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Secondly, in making their investment in Blythe II,
petitioners relied on the advice of their certified public
accountant, Mr. Mathis, Mr. Sheets, who was a promoter for the
partnership, and petitioner's brief conversation with a local
jeweler about the prospects for the use of jojoba bean oil in the
watch and jewelry industry. Mr. Mathis, admittedly, made only a
cursory review of the offering and advised petitioners that,
based on what he had read in the offering, there was some basis
for the investment, there would be some tax advantages, and the
investment had, "at least, some potential". Mr. Mathis testified
that the subject tax deductions appeared reasonable to him
because they were "one for one" deductions rather than the
"multiple write-off kind of investments that were floating around
at that time." Mr. Mathis did not give petitioners a written
opinion about the investment, nor did he conduct any independent
research or consult any type of agricultural or jojoba plant
expert about the investment. Instead, he relied solely on the
representations made in the offering.
Moreover, when questioned by this Court, Mr. Mathis admitted
that, at the time he advised petitioners about Blythe II, he had
rarely been presented with a question concerning research and
development expenses, and he realized that such expenses would
have allowed petitioners certain tax benefits above and beyond
what would have been provided by an ordinary business deduction.
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