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disclose what Mr. Kelly told Baymiller, or what advice, if any,
Baymiller rendered.
Auerbach prepared and signed petitioners' tax returns for
1986 and 1987. On Schedules C filed with their returns for these
years, petitioners reported losses from options trading in the
amounts of $108,318 and $100,917, respectively, and described
Mr. Kelly's principal business as "options dealer". Auerbach's
accounting practice was acquired by Russell T. Glazer (Glazer),
who prepared and signed petitioners' tax returns for 1989 through
1992. In transferring petitioners' account to Glazer, Auerbach
explained the reasoning behind the ordinary loss treatment of
Mr. Kelly's options trading. On Schedules C filed with their
returns for those years, petitioners reported ordinary losses
from options trading of $82,253, $24,717, $143,019, and $178,462,
respectively. Mr. Kelly's principal business is not stated on
the Schedules C for 1989 and 1990, but on the Forms 1040 his
occupation is described as "stckbrkr-trader". The Schedules C
for 1991 and 1992 describe Mr. Kelly's principal business as
"trader". A list of all Mr. Kelly's options trades for the year
was attached to each of the returns for the years 1989 through
1992. The lists are marked "Attachment to Schedule C", and
identify the stock to which the option relates, dates bought and
sold, purchase and sale prices, and gain or loss.
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