- 4 -
which petitioner was the controlling partner.2 Respondent's
audit of petitioner ended on April 22, 1991, with the issuance to
him of a 30-day letter.
On July 17, 1991, petitioner amended his 1985 through 1988
tax returns to assert therein that he was a dealer in Treasury
securities, and that he was entitled to income tax refunds
resulting from reclassifying his gains and losses as ordinary.
On January 11, 1996, respondent issued to petitioner a notice of
deficiency that, in relevant part, disallowed the refund claims
on the amended returns on the basis of respondent's determination
that petitioner was not a dealer in Treasury securities. In this
proceeding, petitioner claims the following income tax refunds on
the basis of his assertion that he was a dealer:
Year Refund
1984 $3,202,380
1985 19,781,480
1986 39,160,798
1987 16,232,812
1988 6,658,075
II. Treasury Securities Cash Market
The Treasury securities cash market consists of bills,
notes, and bonds issued by the Department of the Treasury
(Treasury). Treasury bills (T-bills) are issued in 3-month,
6-month, or 1-year maturities. T-bills are non-interest-bearing
2 BL&H's partnership agreement was amended on Dec. 7, 1985,
to change BL&H's name to B&C as of Jan. 1, 1986. Both BL&H and
B&C filed Forms 1065, U.S. Partnership Return of Income.
Hereinafter, we refer to BL&H as B&C.
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