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The facts pertinent to the instant case relating to the
structure, formation, and operation of Blythe II are as discussed
in Utah Jojoba I Research v. Commissioner, T.C. Memo. 1998-6,
with the exception of a few specific dates and dollar amounts.
Blythe II was organized in December 1982 as a limited partnership
for the described purpose of conducting research and development
(R&D) involving the jojoba plant. The offering, dated November
30, 1982, provided for a maximum capitalization of $2,968,000
consisting of 350 limited partnership units at $8,480 per unit.
Each unit required a cash downpayment of $2,500 and a non-
interest-bearing promissory note in the principal amount of
$5,980 payable in 10 annual installments with an acceleration
provision in the event of default. The offering was limited to
investors with a net worth (exclusive of home, furnishings, and
automobiles) of $150,000, or investors whose net worth was
$50,000 (exclusive of home, furnishings, and automobiles) and who
anticipated that, for the taxable year of the investment, they
would have gross income equal to $65,000, or taxable income, a
portion of which, but for tax-advantaged investments, would be
subject to a Federal income tax rate of 50 percent.
Petitioners' investment was for four limited partnership
units, which required an initial down payment of $10,000 and
execution of a promissory note for $23,920. Petitioners were to
make payments of $2,600 each year from 1983 through 1985, $2,100
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