Richard E. & Elizabeth S. Nilsen - Page 14




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          Despite his relative inexperience with the deductibility of                 
          research and development expenses, however, Mr. Mathis failed to            
          conduct any independent investigation to determine whether the              
          specific research and development proposed to be conducted by or            
          on behalf of the partnership would have qualified for deductions            
          under section 174.  It is also notable that Mr. Mathis had no               
          educational background or experience in the area of agricultural            
          pursuits.                                                                   
               There is no evidence in the record to suggest that                     
          petitioners ever questioned Mr. Mathis about the facts and/or               
          legal analysis upon which he based his recommendations.  Further,           
          the record is devoid of any evidence that petitioners asked Mr.             
          Mathis to explain the Blythe II investment to them, particularly            
          those portions of the offering that they had opted not to read or           
          apparently were unable to understand.                                       
               The facts in these cases are similar to those in Glassley v.           
          Commissioner, T.C. Memo. 1996-206, in which this Court found that           
          the taxpayers:                                                              

               acted on their fascination with the idea of                            
               participating in a jojoba farming venture and their                    
               satisfaction with tax benefits of expensing their                      
               investments, which were clear to them from the                         
               promoter’s presentation.  They passed the offering                     
               circular by their accountants for a "glance" * * *.                    









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