Theodore A. Andros and Joan B. Andros - Page 49

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              b.  Tandrill’s Futures Transactions Were Not Profit Motivated           
              Tandrill’s 1979 gold, silver, and copper futures transactions           
         and the 1980 Treasury bond and GNMA futures transactions were                
         entered into for the purpose of deferring income from one tax year           
         to the next, and generating approximately equal amounts of short-            
         term capital loss and long-term capital gain.  The futures straddles         
         were designed to minimize the volatility of the straddle as a whole,         
         yet produce substantial losses in one leg of the straddle (and               
         offsetting gain in the other leg).  The loss was then realized, and          
         the gain deferred.  In Tandrill’s straddles, the opportunity for             
         profit and risk of loss was minimized by keeping the spreads in              
         effect for short periods of time, putting on spreads with short              
         intervals between delivery dates, and maximizing the butterfly               
         effect.40                                                                    

              39(...continued)                                                        
          primarily for profit and that the transactions were not a type of           
          tax-motivated transaction that Congress intended to encourage.              
                    Petitioners attempt to distinguish Fox on the grounds             
          that the taxpayer in Fox: (1) Did not engage in any Treasury bill           
          futures trading; (2) conducted all the trading in “isolated year-           
          end transactions” that were “unquestionably tax motivated”; and             
          (3) had entered into the options transactions only after both he            
          and his accountant had “thoroughly investigated their potential             
          tax benefits.”                                                              
                    We agree with respondent that the two options spreads             
          Tandrill initiated through Arbitrage Management were similar to             
          the spreads in Fox.                                                         
               40   More specifically, Tandrill’s commodity futures trading           
          was used to defer income from 1979 into 1980 in the case of the             
          gold, silver, and copper straddles cleared through Bache, and               
          from 1980 into 1981 in the case of the Treasury bond and GNMA               
                                                             (continued...)           





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