Theodore A. Andros and Joan B. Andros - Page 17

                                        -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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