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constitute R&D, thereby concluding that the R&D contract was
designed and entered into solely to decrease the limited
partners’ cost of investing in an jojoba partnership through
large, upfront deductions for expenditures that were actually
capital contributions. The Court further concluded that the
partnership was not involved in a trade or business and had no
realistic prospect of entering into a trade or business with
respect to any technology that was to be developed by U.S. Agri.
Id.
Notwithstanding the foregoing, petitioner contends that his
investment in San Nicholas was motivated solely by the potential
to earn a profit. Petitioner also contends that, taking into
account the nature of his investment and the amount he invested,
he exercised the due care that a reasonable and ordinarily
prudent person would have exercised under like circumstances.
Finally, petitioner contends that reliance on Mr. Kellen, Mr.
Pace, Mr. Jacobs, and a professor at the University of California
should absolve him of liability for negligence in this case. For
the following reasons, we disagree with petitioner’s contentions.
First, the principal flaw in the structure of San Nicholas
was evident from an examination of the R&D contract and the
license agreement. Both of these documents were a part of the
offering memorandum. A reading of the R&D contract and the
license agreement demonstrates that the license agreement
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