Beverly Gordon - Page 4

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          Mr. Gordon and Ms. Gordon.  In our Opinion, we addressed Mr.                
          Gordon's contention that the Court should reject respondent's               
          determination that he and Ms. Gordon (petitioners) are not                  
          entitled to the net operating loss deduction for 1988 (claimed              
          1988 NOL deduction), which petitioners claimed in the joint                 
          Federal income tax return (return) that they filed for that year            
          and which is attributable to an alleged net operating loss                  
          carryover from their taxable year 1986.3  Resolution of that                
          issue turned on whether a net trading loss that Mr. Gordon                  
          sustained from his activities as an options market maker during             
          1986 (1986 net trading loss) constituted an ordinary loss, as Mr.           
          Gordon contended, or a capital loss, as respondent contended.  On           
          the record before us, we found that Mr. Gordon failed to show               
          (1) that the 1986 net trading loss constituted a capital loss and           
          (2) that petitioners are entitled to the claimed 1988 NOL deduc-            
          tion.  In so holding, we found on the record presented to us (1)            
          that pursuant to section 1256(f)(3)(A),4 the 1986 net trading               
          loss is treated as a loss from the sale or exchange of a capital            
          asset and (2) that Mr. Gordon failed to establish that the                  
          hedging exception in section 1256(f)(3)(B) applies to any portion           
          of his 1986 net trading loss.                                               

          3  Ms. Gordon did not contend that she and Mr. Gordon are en-               
          titled to the claimed 1988 NOL deduction; instead she agreed to             
          be bound by the Court's holding on that issue.                              
          4  All section references are to the Internal Revenue Code in               
          effect for the years at issue.                                              

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