Edward and Ruth Kelly - Page 6

                                                 - 6 -                                                    

            taxpayer carries on an activity continually and regularly with                                
            the intent of making a profit, he is engaged in a trade or                                    
            business for tax purposes, and losses from the activity are                                   
            deductible without limitation.  He wondered whether Groetzinger                               
            affected the deductibility of the losses he incurred in his                                   
            voluminous options trading.  Mr. Kelly brought the case to the                                
            attention of Yale Auerbach (Auerbach), a certified public                                     
            accountant who had regularly prepared his tax returns since the                               
            early 1950's.  Auerbach read Groetzinger and told Mr. Kelly that                              
            it did not apply to his options trading; in the absence of                                    
            authority to operate his own brokerage business, he would                                     
            continue to be a trader for tax purposes, and must treat his                                  
            losses as capital.  Mr. Kelly informed Auerbach that he was a                                 
            registered options principal, which meant that he was "registered                             
            to deal in options".  Auerbach was unfamiliar with the nature of                              
            this position, but on further questioning, Mr. Kelly satisfied                                
            him that as a registered options principal he was qualified to                                
            establish his own office and "deal as any other broker does".                                 
            Auerbach advised Mr. Kelly that under those circumstances he                                  
            could adopt the position that he was engaged in a business and                                
            that the trading losses were ordinary.  Subsequently, Mr. Kelly                               
            also consulted Carroll Baymiller (Baymiller), the attorney who                                
            had represented the taxpayer in Groetzinger.  The record does not                             

Page:  Previous  1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  Next

Last modified: May 25, 2011