-17-
"physical" copper took place through Manhattan Metals;11 and (8) all
of the futures positions were closed out through "offset".
In 1979 and 1980, Tandrill entered into futures transactions
in gold, silver,12 copper, and Treasury bills through Bache. With
respect to these transactions: (1) The gold and silver trading
began on November 1, 1979, and the copper trading began on November
14, 1979; (2) all the gold, silver, and copper futures transactions
11 Tandrill's trading in "physical" copper had the
following characteristics: (1) Delivery or receipt of the
commodity was never intended and never took place; (2) all gains
and losses were cleared through a "difference account"; (3)
Manhattan Metals was on the other side of each transaction that
Tandrill entered into; Manhattan Metals was the source of any
profits and losses Tandrill realized; and (4) the "physical"
copper trades did not occur on an exchange. Respondent could not
determine how the “physical copper” transactions affected
petitioners’ or Tandrill’s tax returns, and the tax consequences
of these transactions are not in dispute here.
12 The price of silver fluctuated substantially on Nov.
21, 23, and 27, 1979. The following chart (taken from the COMEX
Statistical Yearbook for 1979) indicates the price movement and
number of contracts of September 1980 silver traded each day
between Nov. 15 and 27, 1979:
Price Contracts
Date Movement Traded
Nov. 15 down 7.8 605
Nov. 16 up 7 235
Nov. 19 up 2 126
Nov. 20 up 3 80
Nov. 21 down 21 4,463
Nov. 23 up 31.5 817
Nov. 26 up 7 173
Nov. 27 up 40 4,240
Of the 721 silver contracts that Tandrill closed out in
1979, 718 were closed out on either Nov. 21 or 27, 1979. On Nov.
21, 1979, Tandrill closed out 359 silver contracts by
repurchasing 119 May 1980 silver contracts and 240 December 1980
silver contracts. On Nov. 27, 1979, Tandrill closed out 359
silver contracts by repurchasing 108 March 1981 silver contracts,
75 March 1980 silver contracts, and 176 September 1980 silver
contracts.
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