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Petitioners demonstrate little, if any, idea of how their
investment was supposed to work. They knew nothing about jojoba
research.
They did know that their maximum amount at risk was the
$5,500 they paid in cash, and yet they had the potential to
deduct more than twice that amount as a loss on their Federal
income tax return for 1983. They relied, in making their
investment, entirely on whatever they were told by Desmond. They
did not share that information with the Court. They relied on
Desmond even though this was their first contact with him and
they assumed he would receive a commission from, and thus had an
monetary interest in, making the sale.
The Court finds that petitioners failed to reasonably
attempt to comply with the tax code and regulations. Their
actions evidence a lack of due care or the failure to do what a
reasonable or ordinarily prudent person would do under the
circumstances. Chamberlain v. Commissioner, supra.
Petitioners are liable for the additions to tax under
section 6653(a)(1) and (2) for the year 1983.
To reflect the foregoing,
Decision will be entered
for respondent.
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