-49- 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...)Page: Previous 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 Next
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