28
(9th Cir. (1958) and Commissioner v. Pittston Co., 252
F.2d 344 (2d Cir. 1958); fn. ref. omitted.]
Reasons for Change
The committee believes that the change in the sale
or exchange rule is necessary to prevent tax-avoidance
transactions designed to create fully-deductible
ordinary losses on certain dispositions of capital
assets, which if sold at a gain, would produce capital
gains. * * *
Some taxpayers and tax shelter promoters have
attempted to exploit court decisions holding that
ordinary income or loss results from certain
dispositions of property whose sale or exchange would
produce capital gain or loss. * * *
* * * * * * *
Some of the more common of these tax-oriented
ordinary loss and capital gain transactions involve
cancellations of forward contracts for currency or
securities.
The committee considers this ordinary loss
treatment inappropriate if the transaction, such as
settlement of a contract to deliver a capital asset, is
economically equivalent to a sale or exchange of the
contract. * * * [S. Rept. 97-144, at 170-171 (1981),
1981-2 C.B. 412, 480.]
According to the Court of Appeals for the District of
Columbia Circuit, the above language from the legislative history
indicates that Congress thought that it was changing the law and
that this change in the law is strong evidence that
"cancellation" of commodity forward contracts before the change
in the law produced ordinary losses. Stoller v. Commissioner,
994 F.2d at 858.
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