Estate of Leon Israel, Jr., Deceased, Barry W. Gray, Executor, and Audrey H. Israel - Page 23

            the rights of the parties associated with that portion of the                             
            straddle that was closed.                                                                 
                  With the benefit of further analysis, it is our conclusion                          
            that our opinion in Stoller v. Commissioner, T.C. Memo. 1990-659,                         
            affd. in part and revd. in part 994 F.2d 855 (D.C. Cir. 1993) (in                         
            its treatment of a cancellation and termination of a leg of a                             
            straddle transaction) and the opinion of the Court of Appeals for                         
            the District of Columbia Circuit in Stoller v. Commissioner (in                           
            its treatment of both cancellation and replacement and                                    
            cancellation and termination of legs of straddle transactions)                            
            erred in not recognizing the fundamental sale or exchange nature                          
            of these transactions in which, simply stated, the gain or loss                           
            -- at a certain point in time -- is locked in with regard to the                          
            portion of the straddle that is closed.                                                   
                  As the Court of Appeals for the Fifth Circuit early                                 
            recognized in Commissioner v. Covington, 120 F.2d at 769-770,                             
            "closing" of the contracts at a profit or loss is the sum and                             
            substance of the transactions before us.  We perceive no                                  
            difference, for income tax purposes and in determining the                                
            character of the gain or loss, between closing a leg of a                                 
            straddle and closing the entire straddle.  Both events lock in                            
            the gain or loss on the interest rate shift that has occurred as                          
            of the point in time that a leg or legs of the straddle are                               

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