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Petitioners filed a joint Federal income tax return for
taxable year 1982. Respondent determined a deficiency in
petitioners’ 1982 Federal income tax in the amount of $391,113,
and an addition to tax under section 66611 in the amount of
$97,778.50. Respondent also determined that petitioners were
liable for an increased rate of interest pursuant to section
6621(c) due to a substantial underpayment attributable to a tax-
motivated transaction. The deficiency, addition to tax, and
increased interest relate solely to Alan M. Resser’s stock option
trades.
The primary issue presented at trial was whether losses from
Alan M. Resser's stock option spread transactions should be
disallowed because the transactions were not entered into for
profit. After trial, in Resser v. Commissioner, T.C. Memo. 1991-
423 (Resser I), we held that the losses generated by Alan M.
Resser's stock option trades were not deductible under section
165 because Mr. Resser lacked the requisite profit motive.
Consequently, we sustained respondent's determinations with
respect to the deficiency, addition to tax, and increased rate of
interest.
Prior to trial of Resser I, Melinda B. Resser filed a Motion
to Sever Issue of Innocent Spouse. We granted the motion, and a
1 All section references are to the Internal Revenue Code in
effect for the year in issue, unless otherwise indicated. All
Rule references are to the Tax Court Rules of Practice and
Procedure.
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