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1983. In other words, we must determine whether the blanket
settlement offer that petitioners accepted was an offer to settle
an issue (i.e., the deductibility of Arbitrage Management losses)
or a specific taxable year.
Some of the facts have been stipulated and are found
accordingly. The stipulation of facts and the attached exhibits
are incorporated herein by this reference. We also incorporate
herein the facts enumerated in Manko I. For a better understanding
of this case, we repeat a portion of those facts.
Petitioners resided in Lighthouse Point, Florida, at the time
they filed their petition. They timely filed joint Federal income
tax returns for 1979 through 1983.
A. Arbitrage Management
Arbitrage Management began operations in the mid-to-late
1970's. From 1978 through 1981, Arbitrage Management dealt
primarily in the acquisition of straddle positions in U.S. Treasury
bill options. Beginning in 1982, Arbitrage Management dealt
primarily in the acquisition of U.S. Government securities financed
by repurchase agreements.
Petitioner served as a principal of Arbitrage Management and
a general partner of limited partnerships that invested in
Government securities acquired through Arbitrage Management
(Arbitrage Management partnerships). On their 1978 through 1983
tax returns, petitioners deducted petitioner's distributive shares
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