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any event, we find that their motives were not primarily for profit.
The laws that permit the deduction of valid straddle losses do so
only "if such loss is incurred in a trade or business, or if such
loss is incurred in a transaction entered into for profit though not
connected with a trade or business". DEFRA sec. 108; see Code sec.
165. For a taxpayer to be in a "trade or business", the taxpayer's
activity must have a "primarily for profit" motive. Polakof v.
Commissioner, 820 F.2d 321 (9th Cir. 1987), affg. per curiam T.C.
Memo. 1985-197; Zell v. Commissioner, 763 F.2d 1139 (10th Cir.
1985), affg. T.C. Memo. 1984-152. Thus, whether a taxpayer is in
a trade or business or not, he or she must have incurred tax
straddle losses in an activity engaged in primarily for profit.
Our time focus on a taxpayer's profit motive is at the time the
taxpayer initiated his transactions. Nevertheless, all the
circumstances surrounding the taxpayer's transactions, including the
disposition of the options, are material to the question of the
taxpayer's intent. See Fox v. Commissioner, 82 T.C. at 1022. We
accord greater weight to objective facts than to a taxpayer's self-
serving statements characterizing his or her intent. See id. In
this regard, "It is a fundamental legal maxim that the consequences
of one's acts are presumed to be intended." Id.
Here, the Merit investors who defend their investments were
knowledgeable; many were insiders in the Merit markets. All were
aware that spread transactions offered impressive tax savings while
minimizing the risk associated with those savings. All were aware
of the tax-advantaged nature of the assets being sold, such as T-
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