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generally more favorable long-term capital gains. Such trading,
they claim, demonstrates that economic profits, and not tax savings,
were the object of the trades. Again, petitioners have presented
evidence of such trades without explaining their context--including
the extent to which the short-term capital gains they incurred were
offset by similarly artificial short-term capital losses.
Petitioners also contend that it is "simply not the case" that
Merit's trading was characterized by uniform patterns. Glossing
over undeniable lockstep patterns of the early Merit markets,
petitioners urged that Merit trading became "more and more
idiosyncratic". They indicate that the percentage of open-switch-
close trades varied among the various accounts. Petitioners'
argument obscures the fact that, when Merit trades needed to be
uniform for tax purposes, they were uniform. The investors in each
of the Merit programs uniformly incurred losses in their first years
of trading.23 They then deferred taxable gains into subsequent
years. After posting first-year losses, they could afford to be
more idiosyncratic in their trading. Some investors--such as
petitioners Keeler and Richartz in 1983--having begun a series of
tax deferrals, chose to engage in very little activity. Such
inactivity does not require a finding that the trades were
economically substantial. In fact, during 1983, petitioners Keeler
and Richartz, while generating little in terms of economic results,
were deferring the reporting of millions of dollars of taxable
23 We have noted the single minor exception supra p. 14 and
note 4.
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