17
them as capital transactions thus presupposing a "sale or
exchange," and have never questioned our [Commissioner v.]
Covington, [supra] or Battelle [v. Commissioner, 47 B.T.A.
117 (1942)] cases in which we found a "sale or exchange" in
the "netting" or "offsetting" mechanism of the commodity
exchanges. * * *
We went on in Vickers v. Commissioner, supra at 409, to explain
further:
In the landmark Corn Products [Refining Co. v. Commissioner,
350 U.S. 46 (1955)] case in 1955, the Supreme Court even
then was facing a consistent 20-year practice by respondent
and the lower courts, whereby speculative transactions in
commodity futures received capital treatment * * *. The
Supreme Court cited our Battelle [v. Commissioner, supra,]
case as part of that consistent practice. 350 U.S. at 53
n.8. Moreover, the Congress, too, has assumed that gains
and losses from speculative commodity futures transactions
are capital in nature as shown by the 1950 legislative
history of the predecessor of section 1233 dealing with
short sales of property and by the legislative history of
the recent legislation dealing with commodity futures and
eliminating certain abusive practices involving commodity
tax straddles. [Fn. refs. omitted.]
In Commissioner v. Covington, supra at 769-770, an early
opinion of the Court of Appeals for the Fifth Circuit, involving
a taxpayer's losses from commodity futures contracts, the
fundamentals of such transactions, from a tax standpoint, were
explained, and it was concluded that such transactions in essence
constitute sales or exchanges, as follows:
[The taxpayer argues that the investor] doesn't, by its
dealing, become the owner of any property, it merely enters
into executory contracts which are executed, not by transfer
of property, but by closing them out at a profit or loss,
under the rules of the exchange, without a sale or exchange
of property being involved. * * * [T]he clearing house of
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