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(1) 1981 Merit Transactions
Mr. Keeler closed out his option account in the opening days
of 1981. The account showed income of $1,657,260, taxable as
short-term capital gains, and losses of $1,005,940, reported as
ordinary loss deductions. On February 3, 1981, Mr. Keeler withdrew
his cash balance of $111,720.8 This ended his option trading with
Merit.
After passage of ERTA, Mr. Keeler began his participation in
the Merit stock forwards program. On November 18, 1981, he
deposited $700,000 with Merit and established six forward spreads
in six different stocks. In December 1981, he engaged in 17
taxable transactions. One of those transactions produced a gain of
$96,600, but all the other 16 produced losses, totaling $8,250,260
--including $1,100,620 in ordinary losses for "cancellations" and
$7,149,640 in short-term capital losses. Mr. Keeler's income tax
return for 1981 indicated that these short-term capital losses
operated to offset some $6,697,000 in gains from other commodity
futures accounts.
Mr. Keeler's net realized losses from T-bill options and stock
forwards in 1981, compared to his adjusted gross income in the same
year, were as follows:
A.G.I. Merit A.G.I. Loss % of A.G.I.
Per Return Losses w/o Loss w/o Merit Loss
($3,660) ($7,598,940) $7,595,280 100%
8 This was the amount remaining from the trading in the
T-bill account, which had shown a net cash loss of $38,280.
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