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that some 75 percent of his spreads lost money. Petitioners next
add: "At the end of 1981, some of his closing transactions caused
him to realize gains totaling $96,600." The record reveals that,
at the end of 1981, Mr. Keeler's other closing transactions caused
him to realize overall net losses of $8,250,260.
We have examined petitioners' many diagrams depicting each
investor's range of profit possibilities in the Merit markets. They
may well be individually accurate. Indeed, the realization of token
profits in straddle transactions--where a loss in one leg is offset
by a gain in the other--is not unexpected. It is a given that the
straddle programs had the potential of generating a profit.
Petitioners' demonstration, however, overlooks the fact that the
straddle programs were more efficient at generating skewed tax
deductions. Here the patrons of the Merit markets utilized them to
generate tax deductions, not to earn economic profits. In rejecting
similar contentions, the Court of Appeals for the Third Circuit
explained the governing principle as follows:
The potential for a profit existed but the taxpayers
avoided making a profit by intentionally realizing losses
in the first year which "were not necessary or helpful in
profiting from difference gains in petitioners' commodity
straddle transactions." * * * [Glass v. Commissioner, 87
T.C.] at 1175-76. * * * [Lerman v. Commissioner, 939 F.2d
at 49.]
Nor are we convinced by petitioners' arguments that the Merit
trades were not characterized by uniform results. Petitioners urge
that, instead of uniform results, "some investors made money, some
broke even, and some lost hundreds of thousands of dollars".
However, when uniformity of results was needed--as in first-year
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