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Section 1.6661-3(a)(2), Income Tax Regs., provides that
the substantial authority standard is stricter than the
reasonable basis standard. The regulation also states
that a position with respect to the tax treatment of an
item that is "arguable but fairly unlikely to prevail
in court would satisfy a reasonable basis standard, but
not the substantial authority standard." In the
instant case, petitioners rely heavily on Laureys v.
Commissioner, [92 T.C. 101 (1989)], to support the
position that [Mr. Resser's] trading was profit
motivated. Although we think [Mr. Resser's] position
is arguable, the facts in Laureys are materially
distinguishable from those of this case. Therefore,
[Mr. Resser's] position might arguably satisfy the
reasonable basis standard but falls short of satisfying
the substantial authority standard. * * * [Resser v.
Commissioner, T.C. Memo. 1991-423.]
We disagree with respondent that this mandates a finding that
there was some basis in law for the account QRF loss deduction.
In Laureys v. Commissioner, 92 T.C. 101 (1989), there was no
direct evidence of tax planning or motivation on the part of the
taxpayer. Our statement in Resser I indicates that Mr. Resser
relied on Laureys with respect to the account QRF losses because
the possibility of profit does exist in these types of
transactions. However, as we found in Resser I, Mr. Resser's
pattern of trading in account QRF clearly demonstrated his lack
of a profit motive. Despite what respondent refers to as "the
economic viability and legality" of the option spread
transactions at issue, Mr. Resser's account QRF transactions were
neither conceived nor executed with the dominant objective of
making a profit. Mr. Resser, a sophisticated and experienced
trader, designed his trades to produce a loss. He engaged in
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