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would have caused a prudent investor to question the propriety of
the tax benefits. We would certainly expect no less from an
individual described by his counsel as “an astute businessman”.
Petitioner contends that his experience with farming and his
reading about jojoba gave him confidence in the viability of his
investment in San Nicholas. Petitioner essentially compared and
equated the production costs of jojoba found in the articles he
read with his own knowledge of citrus groves, and concluded that
the jojoba industry would be profitable. Yet, had petitioner
delved deeper into the nature of his investment, he would have
inquired into both the operational aspects of the partnership and
the nature of the research that U.S. Agri was to conduct under
the terms of the R&D contract.22 See Fawson v. Commissioner,
T.C. Memo. 2000-195.
Petitioner contends that he visited jojoba plantations
before he invested in San Nicholas and that such visits
demonstrate due care in making the investment. Yet the record
suggests that petitioner’s visits to the plantations were, at
best, incidental to other business that he had in the Desert
22 We find it curious that petitioner would choose to
emphasize his experience in farming when the record clearly
demonstrates that he did not have any experience in either the
farming of jojoba or the research or development of jojoba. In
addition, petitioner’s professed experience in farming was
essentially limited to some orange groves, which produced a gross
profit of $262 in 1983, and a family-owned ranch in northern
California that was operated, before it was sold in 1980, by his
father.
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