- 29 -
Third, on brief Mrs. Kelly evidently accepted the accuracy
of Mr. Kelly's representation to Auerbach that registration as an
options principal qualified Mr. Kelly to do business as an option
dealer. Inasmuch as Auerbach, an experienced tax professional,
also accepted this conclusion, it appears to us that Mr. Kelly's
representation of himself as an options dealer on the returns did
not constitute such a substantial deviation from ordinary
behavior that it cannot be ascribed to an honest misunderstanding
or simple carelessness.
In this connection, Reid v. Commissioner, T.C. Memo. 1989-
294, cited by respondent, appears to us to have a bearing on the
outcome. In that case, the husband's losses on commodity futures
transactions were incorrectly treated as ordinary rather than
capital on the joint returns. It was held that there was a basis
in fact for the losses because they had actually been sustained
and that there may also have been some basis in law for the
argument that the losses were ordinary because the futures
transactions were related to the husband's farm operations (an
argument under Corn Prods. Ref. Co. v. Commissioner, 350 U.S. 46
(1955)). Similarly here, the fact that Mr. Kelly was in the
securities business and that he and the return preparers had
concluded, in the aftermath of Commissioner v. Groetzinger, 480
U.S. 23 (1987), that he was entitled to be treated as a dealer in
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011