Dwight E. and Leslie E. Lee - Page 4

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                  Although the record in these cases is sketchy and not                               
            entirely clear, it appears that the parties agree that the                                
            transactions at issue here are factually the same as those we                             
            addressed in the Seykota opinions.                                                        
                  In those opinions, we found that the FTI transactions were,                         
            fundamentally, cash and carry tax shelters.  In simplified terms,                         
            an investor would borrow large sums of money.  He would acquire                           
            gold with the loan proceeds.  He would also enter into contracts                          
            to sell that gold at a specified time in the future.  In the gold                         
            markets, the price which the investor paid for the gold was lower                         
            than the price at which he agreed to sell that gold in the                                
            future.  The difference between these two prices largely                                  
            reflected the amounts of interest and other carrying charges that                         
            the investor would incur while he owned the gold.  The A/C                                
            customer would deduct the interest charges plus other carrying                            
            charges--such as charges for management, insurance, and storage--                         
            in the year he borrowed the money.  These deductions offset other                         
            ordinary income for that year.  When he sold the gold in the next                         
            year, the investor would report the gain at favorable capital                             
            gains rates.  The net gain approximately equaled the costs of the                         
            interest and other carrying charges.  In effect, the investor                             
            could defer the taxation of income, at rates as high as 70                                
            percent, for a year.  He could also convert that income into                              
            capital gains taxable at maximum rates no higher than 28 percent.                         
            As an integral part of the FTI A/C transactions, the investors                            




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