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settlement, Mrs. Hemmings received $600,000 that was immediately
transferred to Mr. Hemmings and used to pay his other debts.
Until 1989 funds to support the Conti litigation came in
large part from Brown Transport. In that year, however, Brown
Transport suffered severe losses and was placed in bankruptcy.
Ultimately, the assets of Brown Transport were liquidated. In
order to sustain the Conti litigation and to pay other debts, Mr.
Hemmings borrowed money and Mr. and Mrs. Hemmings sold almost all
of their assets. They sold their house, their furniture, the
luxury cars, the boat, the airplane, and some jewelry. As of the
time of the trial, Mrs. Hemmings owned one piece of real estate
that had a value of approximately $400,000. When the residence
and Mrs. Hemmings' other properties were sold, Mr. Hemmings
borrowed the proceeds from Mrs. Hemmings and the proceeds were
used to pay debts of Mr. Hemmings and costs of the Conti
litigation. Mr. Hemmings has a negative net worth.
ERTA Sections 508(c) and 509 Elections
During 1981 both Messrs. Brown and Hemmings maintained
accounts at E.F. Hutton & Co. and Conti for trading regulated
commodity futures accounts. Some contracts were entered into
prior to June 23, 1981, and others after that date. Sections 501
to 509 of the Economic Recovery Tax Act of 1981 (ERTA), Pub. L.
97-34, 95 Stat. 172, 323-333, made certain changes in the
taxation of straddle and regulated futures contract transactions
that were generally applicable to property acquired or positions
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