- 19 -
from straddle transactions losses discussed in Glass v.
Commissioner, 87 T.C. 1087 (1986).9 In disallowing those losses,
we assumed that "the commodity options and futures contracts
which petitioners entered into were actual contracts. * * *.
Thus, we are here focusing our attention * * * on a question of
law." Id. at 1172. Consistent with this, in Russo we held,
inter alia, that the losses claimed were not grossly erroneous
items because they were not without basis in law or fact but
rather "the losses claimed were not 'intended' by the relevant
Code sections and were not allowable under the rationale of
Gregory v. Helvering, 293 U.S. 465, 469 (1935)." Russo v.
Commissioner, supra at 33. That situation is distinctly
different from here where the evidence indicates that these
transactions were not bona fide and had no basis in fact.
B. Lack of Knowledge and/or Reason to Know
Mrs. Hemmings must establish that she did not know and had
no reason to know that the deductions gave rise to the
9 Glass v. Commissioner, 87 T.C. 1087 (1986), was affd. sub
nom. Bohrer v. Commissioner, 945 F.2d 344 (10th Cir. 1991), affd.
sub nom. Lee v. Commissioner, 897 F.2d 915 (8th Cir, 1989, affd.
sub nom. Kielmar v. Commissioner, 884 F.2d 959 (7th Cir. 1989),
affd. sub nom. Dewees v. Commissioner, 870 F.2d 21 (1st Cir.
1989), affd. sub nom. Freidman v. Commissioner, 869 F.2d 785 (4th
Cir. 1989), affd. sub nom. Keane v. Commissioner, 865 F.2d 1088
(9th Cir. 1989), affd. sub nom. Ratliff v. Commissioner, 865 F.2d
97 (6th Cir. 1989), affd. sub nom. Killingsworth v. Commissioner,
864 F.2d 1214 (5th Cir. 1989), affd. sub nom. Kirchman v.
Commissioner, 862 F.2d 1486 (11th Cir. 1989), affd. sub nom.
Yosha v. Commissioner, 861 F.2d 494 (7th Cir. 1988), affd. sub
nom. Herrington v. Commissioner, 854 F.2d 755 (5th Cir. 1988).
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