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what was bargained for (participation in this interest-sensitive
risk transaction for a period of time) and when the investor
closed the leg or the position (by whichever of the various
"alternative liquidation techniques" that are made available to
investors in commodities forward contracts (see Ewing v.
Commissioner, 91 T.C. 396, 418 (1988), affd. without published
opinion 940 F.2d 1534 (9th Cir. 1991)), the investor effectively
sold off or extinguished and exchanged that right to participate
and realized the gain or loss associated therewith up to that
point in time.
When the investor chooses to dispose of or terminate that
risk, or any part thereof, and to lock in the gain or loss that
has occurred on any leg of the straddle, because of swings in
interest rates on Government securities that have occurred, the
investor elects a method to do so, but each method produces
exactly the same economic event and consequence, only nominal
differences in form, and certainly, as between the parties to the
forward contracts, a sale or exchange of the respective price-
differential and interest-sensitive risk positions that their
contracts represented from the time they first entered into the
forward contracts up until the time that the risk is terminated
and the gain or loss is locked in.
As we stated in Hoover Co. v. Commissioner, 72 T.C. 206, 249
(1979), in analyzing payments labeled as "compensating" payments
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