- 5 -
interest in a manufacturing plant and construction company. By
the mid-1980's, Brown Transport was the ninth largest trucking
company in the United States. Mrs. Hemmings' net worth was $4 to
$5 million and consisted of real estate.
Between 1978 and 1986 Mr. Hemmings speculated in commodity
and treasury bill futures through various brokers and investment
advisers, including E.F. Hutton & Co., Merrill Lynch, ACLI
Government Securities, Inc. (ACLI), and Elms Management Services,
Inc. (ELMS).3 Some of these transactions, and for our discussion
here primarily the ACLI4 and ELMS transactions, were straddles
that purportedly produced substantial ordinary or short-term
capital losses in earlier years and in subsequent years produced
capital gains. The validity of these losses was challenged by
the Commissioner, and notices of deficiency were issued to the
Hemmingses and Mr. Brown for each year from 1978 to 1986.5
ACLI and ELMS Transactions
The only shareholders of Brown Transport were Messrs. Brown
and Hemmings. The expansion of Brown Transport required enormous
amounts of capital. Brown Transport was a so-called S
3 As we understand, Index, Inc. acted as an adviser or
broker to Messrs. Hemmings and Brown on trading conducted through
ACLI, and ELMS played a similar role on trading conducted through
Pershing & Co.
4 The name Index, Inc. also is used. This is another name
for the ACLI transactions.
5 Mr. Brown did not receive a notice of deficiency for the
taxable year 1984.
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011