William R. and Betty O. Bass - Page 3

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          consequences related to the venture, and he relied solely on                
          promoters who had no known experience in jojoba plant farming.              
               Petitioner prepared a joint 1982 Form 1040, U.S. Individual            
          Income Tax Return.  As a result of losses claimed, petitioners              
          requested a refund of $3,742.07, which had been paid by                     
          withholding and estimated tax payments.  On Schedule C, Profit or           
          (Loss) From Business or Profession, petitioner reported his                 
          business as Bass Enterprises, with gross receipts of $444.30 and            
          a net loss of $25,827.79.  Among the items shown as constituting            
          the loss was a “Write-off of Farming Venture $13,150".                      
          Petitioner did not have a Schedule K-1, Partner’s Share of                  
          Income, Credits, Deductions, etc., from Cal-Neva when he filed              
          the 1982 return.  The amount that petitioner deducted on                    
          Schedule C was his estimate of the amount to be claimed based on            
          his conversations with the promoters of Cal-Neva at the time that           
          he paid the $5,000.                                                         
               On February 11, 1987, a Notice of Final Partnership                    
          Administrative Adjustment was sent to petitioners as a partner in           
          Cal-Neva.  In the notice, research and development expenses of              
          $193,150 and amortization of organizational costs of $42 were               
          disallowed to Cal-Neva.  A petition on behalf of Cal-Neva was               
          filed by Yolanda J. Benham (Benham), tax matters partner, as                
          docket No. 6594-87.  On October 18, 1993, the parties in docket             
          No. 6594-87 filed a Stipulation to be Bound setting forth their             

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