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commodity futures trading accounts "to hedge or solve" two
problems that affected the manuscript he wrote describing
a system for trading commodity futures and, thereby, to
"insure and protect the copyright property's value and
worth as an income producing property." According to
petitioner, the manuscript is property described by section
1221(3) and is not included in the term "capital asset".
Thus, according to petitioner, the losses he incurred
trading commodity futures were incurred to "hedge" against
the decrease in the value of the manuscript and "should
receive ordinary treatment as well." As authority,
petitioner cites Corn Products Refining Co. v. Commis-
sioner, 350 U.S. 46 (1955), and FNMA v. Commissioner, 100
T.C. 541 (1993).
There is no precise or ready definition of the term
"hedging". Wool Distrib. Corp. v. Commissioner, 34 T.C.
323, 330 (1960). Generally, it is a label applied to
certain futures transactions which, on all the facts and
circumstances, have been found to be a form of price
insurance and thus connected so closely with the regular
conduct of a trade or business as to defy classification
as extraneous investments. Id. at 330-331. Whether a
transaction constitutes a hedge for Federal income tax
purposes is a question of fact. FNMA v. Commissioner,
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Last modified: May 25, 2011