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(2) 1982 Merit Transactions
Mr. Keeler retained unrealized gains of $7,970,300 from his
1981 stock forwards trades and carried them over into January 1982.
At that time, Mr. Keeler engaged in trades which produced short-
term capital gains of $7,984,320, and he withdrew his remaining
cash balance of $434,060.9
For the next 5 months, Mr. Keeler made no trades in his Merit
account. When he resumed trading in July 1982, he deposited
$500,000; in November he deposited an additional $800,000; and in
December he deposited an additional $300,000 (for a total of
$1,600,000 cash deposited). In the latter half of 1982, Mr. Keeler
established 36 spread transactions. Thirty-two of these made up
"combination spreads" consisting of four straddles in two different
stocks. The only taxable incidents in the account after January
that year occurred in December 1982, when Mr. Keeler engaged in 43
taxable closing transactions. None produced any gain; all 43
produced losses, totaling $9,955,447. These losses consisted of
cancellation losses of $2,725,268 and short-term capital losses of
$7,230,179. Mr. Keeler used them to offset the long-term capital
gain of $7,984,320 from trades executed the previous January.
Mr. Keeler's reported ordinary loss from T-bill options and
stock forwards in 1982, compared to his adjusted gross income in
9 When Mr. Keeler's losses of $8,250,260 from T-bill
option trading in 1980 are netted against his gains of $7,984,320
from T-bill option trading in 1981, the result is an overall
loss of $265,940. This amount, subtracted from his original
deposit of $700,000, produces the balance of $434,060.
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