47
That sentence follows almost immediately after the majority’s
citation to, and quotation from, Commissioner v. Covington,
supra. The majority emphasizes those parts of the court’s
opinion (1) describing the taxpayer’s argument that, pursuant to
exchange rules, offsetting RFCs are extinguished and a money
settlement made and (2) finding that implicit in an exchange
regulated offset is the “agreement and understanding” that an
actual purchase and sale of the underlying commodity has taken
place. Majority op. p. 19. The majority finds that the
agreement and understanding implicit in the exchange rules
governing offsets of RFCs is apropos to the cancellations of the
forward contracts here in issue. Id.
The majority states:
Courts often must address taxpayers’ “artful devices” to
convert ordinary gain into more favorable capital gain or to
convert capital loss into more favorable ordinary loss. * * *
That task should be accomplished on the basis not of the
“cancellation” label used by the parties but on the realities
of the transactions and expectations of the parties.
[Majority op. pp. 24; emphasis added.]
The majority obviously concludes that the common reality of
(1) exchange regulated offsets, (2) the bilateral relationship of
the two parties to offsetting forward contracts, and (3) the
terminated relationship of the parties to a canceled forward
contract is a sale or exchange. Indeed, the majority states
that, in Stoller v. Commissioner, T.C. Memo. 1990-659, affd. in
part and revd. in part 994 F.2d 855 (D.C. Cir. 1993), both this
Court and the Court of Appeals for the District of Columbia
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