- 29 -
service to the public, being placed in a position of
taking on massive positions, responding to public
orders, [and] * * * my motivation was not wholly for
self-profit * * *
* * * * * * *
* * * I was a dealer. * * * I hedged more than
80% of my transactions and all of my inventory was
taken on so that the public interest could be served.
All of this inventory was for resale and allows [sic]
me under Public Law 98-369 [the Deficit Reduction Act
of 1984] to report gains and losses as ordinary.
To support her contention that Mr. Gordon's 1986 net trading
loss is a capital loss, respondent asserts: (1) Pursuant to
section 1256(f)(3)(A), that loss, which Mr. Gordon realized from
trading options as an options market maker, constitutes a loss
from the sale or exchange of a capital asset; (2) the exception
in section 1256(f)(3)(B) to the treatment required by section
1256(f)(3)(A) for certain hedging transactions does not apply to
that loss; and (3) therefore, pursuant to section 1256(a)(3), 40
percent of that loss is treated as a short-term capital loss and
the remaining 60 percent is treated as a long-term capital
loss.12
Section 1256(f)(3), which is headed "Capital Gain Treatment
For Traders in Section 1256 Contracts", provides in pertinent
12 Respondent also contends, in the alternative, that Mr.
Gordon’s 1986 net trading loss is a capital loss because it
resulted from the sale of options that are capital assets within
the meaning of sec. 1221. In light of our holding that that loss
constitutes a capital loss pursuant to sec. 1256(f)(3)(A), we
shall not address respondent's contention under sec. 1221.
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