Pine Creek Farms, Ltd. - Page 9




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          Pork were members of a consolidated group.  Sec. 1.1221-2(d)(1),            
          Income Tax Regs.  They did not file, nor were they required to              
          file, consolidated returns for the tax year.  Secs. 1501 and                
          1502; secs. 1.1221-2(d)(3), 1.1502-1(h), Income Tax Regs.                   
          Therefore, the business transactions of Reis Ag and Grow Pork               
          cannot be attributed to Reis and from Reis to petitioner.  We               
          find no exceptional circumstances which would cause us to ignore            
          the corporate entities and attribute the production of hogs to              
          petitioner.  While it may have been easier for Reis to maintain             
          all the hedging transactions in one account under petitioner's              
          name, the hog futures transactions cannot be treated as hedging             
          transactions of petitioner.  The disallowed loss of $6,305 is a             
          capital loss.  Accordingly, we sustain respondent's                         
          determination.                                                              
               Section 6662(a) provides for an accuracy-related penalty in            
          the amount of 20 percent of the portion of an underpayment of tax           
          attributable to, among other things, negligence or disregard of             
          rules or regulations.  Sec. 6662(a) and (b)(1).  Section                    
          6664(c)(1) provides that no penalty shall be imposed if it is               
          shown that there was reasonable cause for the underpayment and              
          that the taxpayer acted in good faith.  The determination of                
          whether a taxpayer acted with reasonable cause and in good faith            
          depends upon the facts and circumstances.  Sec. 1.6664-4(b)(1),             







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