Tom I. Lincir and Diane C. Lincir - Page 3

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          their participation in tax shelter programs known as the                      
          "Arbitrage Carry" gold trading program promoted by Futures                    
          Trading, Inc. (the FTI program) and the Treasury bill option and              
          stock forward transactions promoted by Merit Securities, Inc.                 
          (the Merit Securities program).  In 1984 and 1985, petitioners                
          reported taxable gains from offsetting straddle transactions                  
          carried out in connection with the Merit Securities program.                  
          Respondent determined deficiencies in and additions to                        
          petitioners' Federal income tax liabilities for the taxable years             
          1978 through 1982 based upon the disallowance of losses that                  
          petitioners claimed with respect to the FTI and Merit Securities              
          programs.  Respondent also determined that petitioners are liable             
          for interest computed at the increased rate prescribed in section             
          6621(c) (section 6621(c) interest) for each of the years in                   
          issue.  Respondent also determined that petitioners are liable                
          for additions to tax under section 6653(a)(2) for 1981 and 1982.              
               Petitioners filed a timely petition contesting respondent's              
          determinations.  They subsequently agreed that adjustments                    
          related to their participation in the Merit Securities program                
          would be redetermined in the same manner as certain test cases.               
          In the test cases, reported as Leema Enterprises, Inc. v.                     
          Commissioner, T.C. Memo. 1999-18, the Court disallowed all losses             
          related to the Merit Securities program on the alternative                    
          grounds that the program lacked economic substance and Merit                  
          Securities program participants failed to meet the statutory                  

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