- 5 -
derivative of the plant was an ingredient in face creams and
sunscreens. Petitioner did not consult an attorney or any
independent expert in agriculture or jojoba plants regarding
whether jojoba oil or any other jojoba derivative had a
potentially lucrative commercial market. Petitioners,
nevertheless, invested in Blythe II.
On their joint 1982 Federal income tax return, petitioners
reported wages of $258,000 from petitioner's medical practice,
interest income of $1,605.91, taxable dividend income of $2,550,
and capital gains of $4,694.62. Petitioners reported total net
losses from two separate partnerships of $52,464 for 1982, of
which $20,933 was the loss from Blythe II.4 Thus, petitioners
reported total income of $214,386.53 and a total tax liability of
$69,854.69.5
On their joint 1983 Federal income tax return, petitioners
reported wages of $233,018.11 from petitioner's medical practice,
interest income of $3,479.22, taxable dividend income of $136.89,
and capital gains of $14,139.84. Petitioners reported total net
4 The other $31,531 partnership loss was in connection
with Arrowhead Village, a real estate partnership promoted by Mr.
Sheets.
5 During April 1986, petitioners filed an amended return
for 1982 reporting a decrease in adjusted gross income of $2,921
due to an additional $2,921 loss in connection with the
aforementioned Arrowhead Village partnership. On the amended
return, petitioners reported a total tax liability of $68,394.19.
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