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entered into solely to decrease the limited partners’ cost of
investing in an jojoba partnership through large, upfront
deductions for expenditures that were actually capital
contributions. The Court further concluded that the partnership
was not involved in a trade or business and had no realistic
prospect of entering into a trade or business with respect to any
technology that was to be developed by U.S. Agri. Id.
Notwithstanding the foregoing, petitioners contend that
petitioner’s investment in San Nicholas was motivated solely by
the potential to earn a profit. Petitioners also contend that,
taking into account petitioner’s experiences as a successful
businessman and the nature of petitioner’s investment, petitioner
exercised the due care that a reasonable and ordinarily prudent
person would have exercised under like circumstances. Finally,
petitioners contend that reliance on Mr. Kellen, Mr. Pace, a
professor at the University of California, and Mr. Maryanov should
absolve petitioners of liability for negligence in this case. For
the following reasons, we disagree with petitioners’ contentions.
First, the principal flaw in the structure of San Nicholas
was evident from an examination of the R&D contract and the
license agreement. Both of these documents were a part of the
offering memorandum. A reading of the R&D contract and the
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