-44-
any loss from such disposition shall be allowed for the
taxable year of the disposition if such loss is incurred
in a trade or business, or if such loss is incurred in a
transaction entered into for profit though not connected
with a trade or business.
(b) Loss Incurred in a Trade or Business.--For
purposes of subsection (a), any loss incurred by a
commodities dealer in the trading of commodities shall be
treated as a loss incurred in a trade or business.
Accordingly, a taxpayer, other than a commodities dealer,36 is
not eligible to deduct a loss on the disposition of a leg in a
straddle, unless the taxpayer proves that the loss was incurred “in
a transaction entered into for profit”. DEFRA sec. 108 as amended.
To meet this requirement the taxpayer must establish that he entered
into the straddle transaction primarily for profit. Ewing v.
Commissioner, 91 T.C. 396, 416-417 (1988), affd. without published
opinion 940 F.2d 1534 (9th Cir. 1991); Boswell v. Commissioner, 91
T.C. 151, 158-159 (1988). To meet the primarily-for-profit test,
the investor need not be unaware of the tax consequences that might
ensue from his transactions. However, where an investor has a
profit motive as well as a tax motive for entering into the
investment, the profit motive must be of first importance.
Because petitioner’s investments were made through Tandrill,
the existence of a profit motive must be determined at the
36 Neither respondent nor petitioners contend that
petitioner or Tandrill was a commodities dealer for purposes of
the profit motive presumption of DEFRA sec. 108(b) as amended.
See Kovner v. Commissioner, 94 T.C. 893 (1990).
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