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deduction lacked a basis in law. Mrs. Resser bears the burden to
prove that the loss deduction had no basis in law at the time
petitioners filed their 1982 Federal income tax return. Rule
142(a); Busse v. United States, 542 F.2d 421, 425 (7th Cir.
1976).
Mrs. Resser relies on our holding in Resser I to prove that
Mr. Resser's stock option spread losses are grossly erroneous
items. Specifically, she argues that, because we found "pursuant
to well settled legal principles" that Mr. Resser's stock option
trades were "not engaged primarily for profit", there was no
legal basis for deducting the account QRF losses.
Respondent's principal contention is that, because the
trades were legitimate, i.e., the trades were executed on a
regulated exchange and entered into using the open outcry auction
method during the regular trading period on the exchange, and, as
recognized by the Court in Resser I,8 the potential for both
8 In Resser I, we stated:
It is uncontested that the potential for
profit exists in stock option spread
transactions like those engaged in by
petitioner, as does the potential for
economic loss. However, the fact that there
is a reasonable expectation of profit is not
determinative. Ewing v. Commissioner, [91
T.C. 396,] 416. The relevant test is whether
petitioner's primary purpose for entering
stock option spread transactions was for
profit. We agree with respondent that the
TDY trades at issue were not primarily profit
(continued...)
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