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Respondent also determined a deficiency of $97,892 in, and a
penalty of $19,578 pursuant to section 6662(a) on, petitioners'
1991 Federal income tax. Unless otherwise noted, all section
references are to the Internal Revenue Code in effect for the
years in issue, and all Rule references are to the Tax Court
Rules of Practice and Procedure.
After concessions, the sole issue to be decided is whether
petitioner may deduct, as an ordinary and necessary business
expense, a $75,000 fine paid during 1989 to the Chicago
Mercantile Exchange (CME) in settlement of a disciplinary
proceeding brought against him by the CME.
FINDINGS OF FACT
Some of the facts have been stipulated for trial pursuant to
Rule 91. The parties' stipulations of fact are incorporated
herein by reference and are found as facts in the instant case.
At the time they filed the petition in the instant case,
petitioners resided in Wilmette, Illinois. During relevant
periods, petitioner used the cash method of accounting.
Since 1984 and at all times relevant to the instant case,
petitioner was a member of the CME. Petitioner conducted two
separate trades or businesses as a member of the CME, acting as a
floor broker executing trades in Eurodollar futures contracts (an
interest-rate sensitive futures contract) for the accounts of
other persons and trading certain types of futures contracts for
his own account. Petitioner conducted his business as a floor
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