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with specified settlement dates in 1981 and 1982, the offsetting
contracts extinguished each other. The transactions were
settled, terminated, and closed. Nothing survived as between the
parties to these particular forward contracts into 1981 and 1982.
Whether 6-months’ offsetting forward contracts, all of the
legs of an entire straddle, or simply one leg thereof, are
settled or closed 1 week or 1 month after they are entered into,
or not until the initially specified settlement date, and by
whatever method used to settle or close the contracts (in the
instant cases, by offset, by cancellation and replacement, and by
cancellation and termination), in each situation the capital
transaction that the parties entered into through the forward
contracts, the straddle, and the legs thereof, has been closed
and the payment received (if a gain is realized) or made (if a
loss is realized) represents exactly the same type of income or
loss earned with regard to the contracts, the straddle, or the
legs thereof, for the length of time the forward contracts were
outstanding.
Other legs of the straddle may remain open, and the parties
may continue to be exposed to continuing shifts in interest rates
and in price fluctuations of Government securities for the
duration or length of time that other legs of the straddle remain
open, but with regard to the leg that has been closed, or
canceled, or offset, the transaction is closed, and a completed
sale or exchange has occurred under section 1221 with regard to
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