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Dr. Richartz's reported ordinary losses from stock forwards in
1983, compared to his taxable income in the same year, were as
follows:
T.I. Merit A.G.I. Loss % of A.G.I.
Per Return Losses w/o Loss w/o Merit Loss
$52,2601 ($65,448) $117,708 56%
1 Dr. Richartz's adjusted gross income was $152,044. He
deducted Merit stock forwards cancellation fees of $65,448,
however, reducing his income by that amount.
Dr. Richartz continued trading in the stock forwards account for
the next 2 years, which are not at issue here. At the end of his
trading, he reported an economic profit from stock forwards trades
of $103,089.
C. Maria Rivera
Petitioner Rivera is a native of Spain. She began trading
with Dr. Richartz in 1971, making trades based upon Dr. Richartz's
recommendations. When the Merit programs began, Ms. Rivera allowed
Dr. Richartz to trade her account, understanding that he would use
her account, like his own, as a market maker. Her Merit
investments included trading in the T-bill options, T-bond options,
and stock forwards contracts. As a market maker, Ms. Rivera
received interest on her excess margin deposits and paid no bid/ask
differential in acquiring her positions on the Merit markets.
During the period that Dr. Richartz actively traded her
account, Ms. Rivera suffered from Addison's disease, a debilitating
illness that makes it difficult to work for long hours or under
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