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information provided by Mr. Cole and on the opinion letter given
to Mr. Cole by outside counsel. The Schedule K-1, Partner’s
Share of Income, Credits, Deductions, etc., sent to petitioners
as partners in Arid Land reflected their share of the losses
claimed by the partnership on the return prepared by Mr.
Trimboli. Mr. Trimboli subsequently prepared petitioners’ joint
Federal income tax return for the taxable year 1983, claiming a
deduction for a loss arising from the Arid Land investment in the
amount of $12,407. At the time Mr. Trimboli prepared
petitioners’ return, petitioner was aware that Mr. Trimboli had
obtained a tax opinion letter, and petitioner was convinced that
there was nothing improper about the tax strategy.
As the result of partnership level proceedings concerning
Arid Land Research Partners, this Court ultimately entered a
decision disallowing in full the partnership’s claimed ordinary
loss of $463,688 for taxable year 1983. This decision was based
upon a stipulation by the partnership and the Commissioner to be
bound by the outcome of the case in which this Court rendered our
opinion in Utah Jojoba I Research v. Commissioner, T.C. Memo.
1998-6. In that case, we found that the Utah Jojoba I Research
partnership (“Utah I”) was not entitled to a section 174(a)
research or experimental expense deduction (or a section 162(a)
trade or business expense deduction) because (a) Utah I did not
directly or indirectly engage in research or experimentation, and
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