Estate of Leon Israel, Jr., Deceased, Barry W. Gray, Executor, and Audrey H. Israel - Page 22

           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                            
                 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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