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should not invest unless they could “afford the total loss
of their investment”.
The prospectus contained five pages of warnings of material
tax risks associated with investments in Blythe II, and the
prospectus urged investors to consult a tax adviser, as well as
independent counsel.
In spite of the risks identified in the prospectus,
petitioners did not consult, in any diligent way, with an
independent, professional tax or legal adviser. Petitioner spoke
over the telephone with W. Larry Swecker (Swecker), his tax
accountant, with relatives, and with friends. Swecker made
nothing more than a cursory review of the Blythe II prospectus
and the tax law.
Petitioners did not make any meaningful study of the
proposed investment. Petitioners never visited the Blythe II
jojoba farm before making an investment decision, even though
petitioners acknowledged visiting on a number of occasions the
locale in which the farm was located.
In spite of the many risks and warnings, in December of
1982, petitioners invested $40,000 in cash in Blythe II, and
petitioners signed a $95,680 promissory note associated
therewith.
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