53
the exceptional treatment of capital gains and losses. In sum,
the majority has failed to examine the nature of the contract
rights terminated by the cancellations of the forward contracts
in issue in the manner contemplated by Judge Friendly and,
therefore, is foreclosed from relying on Commissioner v. Ferrer,
supra, to support its substance and reality analysis.
Another difficulty with the rationale of the majority is the
majority’s failure to explain the steps by which it proceeded to
conclude that the cancellation losses were losses from the sale
or exchange of capital assets. Section 1001 addresses the
determination of gains and losses on the disposition of property.
The sale or exchange requirement for capital gain or loss
treatment is introduced in section 1222. The majority has failed
to explain exactly what property was disposed of when a forward
contract was canceled, how the partnership’s adjusted basis in
the disposed-of property was determined, or what amount was
realized on such disposition. I must admit that I am puzzled by
those questions, as I am puzzled by how Judge Friendly’s
“equitable interest” analysis could be applied to find a capital
loss in a situation where the last thing the partnership intended
was actual delivery of the underlying securities that were the
subject of the forward contracts in question. Given Congress'
enactment of section 1234A, I see no reason to engage in an
analysis that may result in consequences we cannot foresee.
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