Estate of Leon Israel, Jr., Deceased, Barry W. Gray, Executor, and Audrey H. Israel - Page 25

            had been entered into.  Leh v. Commissioner, supra (termination                           
            of petroleum supply contract); Commissioner v. Pittston Co.,                              
            supra (termination of exclusive coal purchase contract); General                          
            Artists Corp. v. Commissioner, supra (cancellation of performance                         
            contract); Commissioner v. Starr Bros., supra (termination of                             
            exclusive pharmaceutical sales contract).                                                 
                  It seems obvious to us that the cancellations involved in                           
            the above cases are fundamentally different from the                                      
            "cancellations" of forward contracts that are involved herein                             
            where the "cancellations", lock in, settlement, or closing that                           
            occurred are exactly what the parties contemplated when they                              
            entered into the forward contracts (namely, Holly and AGS                                 
            contemplated that Holly would have the risk of price fluctuations                         
            on each leg of the straddle from the day the straddle was first                           
            opened until whatever day Holly chooses to lock in the gain or                            
            loss).  Holly received the benefit of that contract and now                               
            becomes liable for the burden (namely, the loss incurred on the                           
            legs Holly chose to close).  Holly received exactly what it                               
            contracted for.  AGS did likewise.  In this sense, the                                    
            transactions in question with respect to the loss legs do not                             
            represent cancellations.  They represent consummations.  The                              
            cases, therefore, involving unexpected cancellations of                                   
            commercial contracts are of limited applicability.                                        
                  In a number of cases, taxpayers and respondent have sought                          
            to invoke the "disappearing asset" theory, but that theory was                            
            found to be inapplicable where a close scrutiny of the substance                          

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Last modified: May 25, 2011