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distribution system for jojoba, and the highly speculative nature
of the investment. Petitioner ignored these warnings.
On brief, petitioner painstakingly dissects portions of the
offering memorandum in an attempt to show that he carefully
perused what he calls a “business plan”. Petitioner’s piecemeal
approach to the offering memorandum ignores the existence of the
strong cautionary language. A careful review of the offering
memorandum, especially the portion discussing the tax risks,
would have caused a prudent investor to question the propriety of
the tax benefits. We would certainly expect no less from a well-
educated and sophisticated individual such as petitioner.
Petitioner contends that he also conducted his own analysis
of San Nicholas prior to investing. However, there is no
persuasive evidence that petitioner’s “analysis” was based on
anything other than the projections set forth in the offering
memorandum. See Tokarski v. Commissioner, 87 T.C. 74, 77 (1986).
Investors were warned, however, that those projections had been
prepared for the general partner, had not been audited, and
should not be relied on. There is nothing in the record to
persuade us that petitioner’s “projections” were ever audited or
examined by any disinterested third party. Any reliance on those
projections was unreasonable.
Petitioner contends that his experience with farming and his
reading about jojoba gave him confidence in the viability of his
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