- 8 -
ordinary, and not a capital, loss because of the hedging nature
of his transactions.5
Ms. Gordon contends that even if Mr. Gordon had claimed that
he held most of the options that generated the 1986 net trading
loss for the purposes specified in section 1256(f)(3)(B), she
nonetheless satisfied her burden of proof under section
6013(e)(2)(B). That is because, according to Ms. Gordon, the
"record clearly establishes that Mr. Gordon did not hold any of
his options for the purposes specified in �1256(f)(3)(B), and
that �1256(f)(3)(B) does not provide a substantial legal argument
for Mr. Gordon's claimed ordinary loss deduction in 1986." To
support her position, Ms. Gordon points, inter alia, to Mr.
Gordon's testimony that (1) he used certain options to hedge the
risks that were associated with certain other options, (2) he
used common stock to hedge the risks that were associated with
certain other options, and (3) he held the common stock that he
had in his "account" as a "hedge." Based on that testimony, Ms.
Gordon concludes that the hedging activities about which Mr.
Gordon testified were the only hedging activities in which he was
involved and that Mr. Gordon did not use the options that gener-
ated the 1986 net trading loss to hedge the risks that were
5 For example, Mr. Gordon contended in his answering brief that
"IRC Code 1256 Treas Reg. 1.1221-2 states" that "To qualify for
ordinary treatment as a hedging transaction taxpayer must show
that the options served to reduce risk with respect to ordinary
property".
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