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last day of its taxable year, Merit engaged in transactions that
produced realized yearend T-bill losses of $3,238,420. Twelve of
these transactions were for losses; there was one gain transaction
of $12,000. Merit retained and carried unrealized gains of
$3,330,690 in account No. 219 into its next taxable year.
During its taxable year 1981, Merit traded in three other T-
bill accounts, apparently as an accommodation to other customers'
trades. Activity in Merit's account No. 133 began and ended
between September and the end of November 1980. The trading left
Merit with a realized gain of $144,860. The principal purpose of
account No. 133 (and most of its profits) arose from its taking the
other side of a trade in which Merit's customer, Monex, switched
and closed a trade involving 1,650 call contracts. The switch,
executed on September 26, 1980, generated a loss of $9,060,958.50
for Monex, whose taxable year ended 4 days later.
Merit's account No. 221 traded only over a 10-day period from
December 29, 1980, through January 7, 1981. Merit realized a loss
of $2,940. Its most notable activity was taking the other side of
a trade in which Merit's customer Seykota switched and closed
trades involving 1,500 put and another 1,500 call contracts. The
switches, executed on December 31, 1980, generated losses totaling
$9,345,000 for Mr. Seykota, whose taxable year ended that day.
Similarly, Merit's account No. 223 traded only over an 8-day
period during the last week of December 1980 and the first week of
January 1981. It traded with a number of customers. Its largest
transaction arose from a trade on January 5, 1981, closing out a
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