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Mr. McDonald with the bookkeeping for his medical practice which
was needed for the preparation of petitioners’ tax returns.
During the years in issue, petitioner wife (Mrs. McDonald)
was a part-time graduate student pursuing a master’s degree in
science and psychiatric nursing. Like Mr. McDonald, she has no
academic background in finance, accounting, or economics. Mrs.
McDonald met Mr. Trimboli approximately the same time as did Mr.
McDonald, when Mr. Trimboli began preparing their tax returns.
Through the end of 1982, petitioners’ relationship with Mr.
Trimboli was solely in the context of tax return preparation.
Starting in early 1983, Mr. Trimboli began offering financial
planning services in addition to accounting and tax services.
Petitioners began using these services, and as of the end of 1983
petitioners had invested in various mutual funds as well as
several partnerships which had been recommended by Mr. Trimboli.
In December 1983, again upon Mr. Trimboli’s recommendation,
petitioners purchased 14 units in a partnership known as Arid
Land Research Partners (“Arid Land” or “the partnership”).
Petitioners purchased their interest in the partnership with cash
of $15,400 and a promissory note of $23,100.2 In making the
2The parties stipulated that the investment was made with
$14,000 in cash and a promissory note of $24,500. However, we do
not accept this stipulation because it is contradicted both by
the terms of the private placement memorandum (referenced in the
stipulation itself) and by the Schedule K-1, Partner’s Share of
Income, Credits, Deductions, etc., sent to petitioners by the
(continued...)
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