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general caveats and disclaimers along with the opinion that “it
is more likely than not that a partner of Arid Land Research
Partners, a Limited Partnership will prevail on the merits of
each material tax issue presented herein.” However, the
conclusions regarding the issue of the section 174 deduction in
particular were vague and nonconclusive in nature.
Finally, the investor subscription agreement accompanying
the private placement memorandum required a subscriber upon
purchase of an interest to aver that:
He understands that an investment in the Partnership is
speculative and involves a high degree of risk, there is no
assurance as to the tax treatment of items of Partnership
income, gain, loss, deductions of credit and it may not be
possible for him to liquidate his investment in the
Partnership.
In December 1983, petitioners purchased five units in Arid
Land through Mr. Trimboli for a total of $5,500 in cash and a
promissory note of $8,250. Petitioner was aware that Mr.
Trimboli received a commission for his sale of the interests in
Arid Land, but he did not know of any other relationship which he
had with the partnership or its principals.
The commissions Mr. Trimboli received for selling interests
in the partnership were similar to the commissions he received
for selling other types of investments. In addition to the
commissions, Mr. Trimboli was retained by Arid Land to prepare
the 1983 tax return for the partnership. In preparing the
partnership’s return, Mr. Trimboli relied on financial
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