- 43 -
of ERTA, at 309 (J. Comm. Print 1981). ERTA removed the chief
advantage of commodity straddling--that is, taking a loss on one
leg the first year and deferring the cognate gain from the other
leg into later tax years. Sec. 1092, added by ERTA sec. 508(a),
(c).
The conference report explained that the new law "allows
straddle losses only to the extent such losses exceed the
unrealized gains on offsetting positions. Disallowed losses are
deferred. * * * The loss deferral rule applies to actively-traded
personal property (other than stock)". H. Conf. Rept. 97-215, at
258 (1981), 1981-2 C.B. 481, 513.
The same legislation repealed section 1221(5) with respect to
obligations acquired after June 23, 1981, and subjected short-term
governmental obligations to new section 1232(a)(3) (now section
1232(a)(4)). The new law thus eliminated the possibility of
reporting ordinary losses on the disposition of options relating to
Treasury bills.
After the enactment of ERTA, Merit began to deal in stock
forwards. The PPM for its stock forwards advised that a forward
position in stock is not subject to the loss limitations of ERTA.
See Rivera v. Commissioner, 89 T.C. 343 (1987).18
This Court has often examined the tax aspects of straddles of
futures or forward contracts for financial instruments. Where the
18 Congress repealed the statutory provision that stock
was not subject to the loss limitation provisions of ERTA in
1984. See supra note 10.
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