Leema Enterprises, Inc. - Page 39




                                       - 39 -                                         

          customer named Milburn Partners at a loss of $119,000.  At the end          
          of trading, account No. 233 showed a profit of $7,466 for Merit.            
                    (3)  1982 Transactions                                            
                         (a)  T-Bill Options                                          
               During its taxable year 1982 (beginning July 1, 1981), after           
          passage of ERTA, Merit's T-bill operations slowed dramatically.  It         
          had only two clients, Case Holdings and Monex.14  Merit closed out          
          a number of its spreads, realizing carried-over gains of                    
          $2,774,360.  Its accounts, reflected on Leema's 1982 Federal income         
          tax return, show T-bill option trading income of $2,766,085,                
          apparently reflecting the unrealized appreciations retained from            
          trading in earlier years.                                                   
                         (b)  Stock Forwards                                          
               During its taxable year 1982, Merit's principal trading                
          activity took place in its new stock forwards program.  Merit's             
          stock forwards account was account No. 601. Merit acted as the              
          "other side" for its stock forwards clientele.  The nonmarket               
          makers had approximately 17,000 trades.  At the end of its taxable          
          year, Merit reported T-bill option income of $2,766,085 and                 
          "cancellation fee" deductions of $2,845,358.                                
               Leema (Merit's parent corporation) had two additional wholly           
          owned subsidiaries which engaged in stock forwards trading:                 
          Horizon Trading, Inc. (formerly Merit Trading, Inc.) (Horizon),             


               14   Case Holdings ended its T-bill trading in 1982.  Merit            
          continued to trade T-bill options with its single remaining                 
          customer, Monex, until 1988.                                                

Page:  Previous  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  Next

Last modified: May 25, 2011