-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...)
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