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In this case, the pattern of first year losses is unmistakable.
Mr. Keeler began with his T-bill investment in November 1980.
His only taxable transactions that year were the sales of 80 T-bill
contracts in December. Each produced losses. He left the T-bill
market in February 1981. In November 1981, Mr. Keeler began his
involvement with the Merit stock forwards. His only taxable
transactions came in December of that year, when 16 of his 17 stock
forwards trades produced losses. The pattern held true in the next
year; in December 1982, he engaged in 43 taxable transactions, all
resulting in losses. His trading was relatively quiet in 1983 and
ended in 1984.
Dr. Richartz's trades reveal a similar pattern. His T-bill
involvement began in November 1979, and his closings all took place
in December of that year, generating losses of $77,440. In 1980,
he engaged in some midyear trades with other Merit participants;
those trades generated a small gain. In December, however, he
disposed of 115 T-bill contracts, all for losses. He then invested
in the stock forwards program beginning in November 1981. He made
17 trades in December, all for losses. At the end of 1982, he
engaged in 23 stock forwards trades; 22 were for losses. His single
gain transaction of $56,600 was vastly overshadowed by the losses
of $4,499,307. His 1983 trading took place in the last half of that
year, and by November he had more than $2 million in capital gains.
In December, however, he eliminated this gain by taking losses,
leaving his account at a minus $61,807.
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