Robert G. Leslie and Marilyn B. Leslie - Page 25

                                       - 25 -                                         
          return on investment, and that tax benefits were purely coinci-             
          dental.  We disagree.                                                       
               This Court in Ewing v. Commissioner, 91 T.C. 396 (1988),               
          stated that the phrase "entered into for profit" as used in DEFRA           
          section 108(a) is to be interpreted by reference to the standard            
          applied under section 165(c)(2).  Ewing v. Commissioner, supra at           
          417.  The Court in Ewing used the guidelines provided in Fox v.             
          Commissioner, 82 T.C. 1001 (1984), to determine whether the                 
          Hunter gold straddle transactions were entered into primarily for           
          profit.  Id.                                                                
               In Fox v. Commissioner, supra at 1021, this Court concluded            
          that section 165(c)(2) requires that profit be the primary motive           
          if a loss from a straddle transaction is to be deductible.  The             
          Court stated that profit need not be the sole motive for engaging           
          in a straddle transaction, but that a mere incidental profit                
          motive would be insufficient.  Id. at 1019 (citing Ewing v.                 
          Commissioner, 20 T.C. 216, 233 (1953), affd. 213 F.2d 438 (2d               
          Cir. 1954)).  To determine whether a straddle transaction was               
          entered into for profit, Fox provides the following guidelines:             
               (1) The ultimate issue is profit motive and not profit                 
          potential.  However, profit potential is a relevant factor to be            
          considered in determining profit motive.                                    
               (2) Profit motive refers to economic profit independent of             
          tax savings.                                                                

Page:  Previous  15  16  17  18  19  20  21  22  23  24  25  26  27  28  29  30  31  32  33  34  Next

Last modified: May 25, 2011