Robert G. Leslie and Marilyn B. Leslie - Page 33

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          section 108(c) allows petitioners to take a net out-of-pocket               
          loss for 1982.  The net out-of-pocket loss would represent the              
          amount by which petitioner's straddle losses during the subject             
          years exceeded his straddle gains during the subject years.                 
          Respondent contends that petitioners are only entitled to offset            
          petitioner's straddle gains by straddle losses to the extent of             
          his straddle gains.  See Ewing v. Commissioner, 91 T.C. at 421.             
               DEFRA Section 108(c) provides as follows:                              
                    (c)  Net Loss Allowed.--If any loss with respect                  
               to a position described in paragraphs (1) and (2) of                   
               subsection (a) is not allowable as a deduction (after                  
               applying subsections (a) and (b)), such loss shall be                  
               allowed in determining the gain or loss from disposi-                  
               tions of other positions in the straddle to the extent                 
               required to accurately reflect the taxpayer's net gain                 
               or loss from all positions in such straddle.                           
               Further interpretation of DEFRA section 108(c) is provided             
          by section 1.165-13T, Q&A-3, Temporary Income Tax Regs., 49 Fed.            
          Reg. 33445 (Aug. 23, 1984), which states as follows:                        
                    Q-3.  If a loss is disallowed in a taxable year                   
               (year 1) because the transaction was not entered into                  
               for profit, is the entire gain from the straddle                       
               occurring in a later taxable year taxed?                               
                    A-3.   No.  Under Section 108(c) of the Act the                   
               taxpayer is allowed to offset the gain in the subse-                   
               quent taxable year by the amount of loss (including                    
               expenses) disallowed in year 1.                                        
               This Court recently confronted this issue in Nolte v.                  
          Commissioner, T.C. Memo. 1995-57, and held that DEFRA section               
          108(c) entitles taxpayers to offset straddle losses only to the             
          extent of straddle gains.  The taxpayers in Nolte, like peti-               
          tioner, were involved in the Hunter program.                                

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