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The only issue remaining in dispute between the
parties is whether petitioners are entitled to interest
expense deductions claimed in connection with Peng
Partners. This issue relates to the Merit project and
either will be resolved by the parties or submitted to
the Court for resolution.
As a result of a continuing dispute as to the proper
interpretation of terms of the stipulation, a number of motions
were filed and resolved by the Court.2 When cross-motions for
orders to show cause were filed in March and April 1996, the
Court set these cases for hearing at a session scheduled to take
place in New York, New York. The cases were ultimately submitted
fully stipulated.
Background
At the time the petitions were filed, petitioners resided in
New York, New York. During 1977 through 1980, petitioner Dwight
E. Lee (petitioner) was a partner in an entity known as Peng
Partners. During those years, Peng Partners participated in
"Arbitrage and Carry" (A/C) transactions promoted by FTI. In
1979 and 1980, Peng Partners also participated in T-Bill options
transactions through Merit. This Court has considered both the
FTI A/C transactions and the Merit T-Bill options transactions in
cases involving Merit Securities. See Seykota v. Commissioner,
T.C. Memo. 1991-234, supplemented by T.C. Memo. 1991-541.
2 Other investors also disputed the terms of apparent
agreements with respect to transactions with FTI/Merit. See, for
example, Lamborn v. Commissioner, T.C. Memo. 1994-515.
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