Keith M. Rudman - Page 5




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                    section 1256 contracts or property related to                     
                    such contracts.  [Emphasis added.]                                

               A commodities dealer is defined in section 1402(i)(2)(B) as            
          “a person who is actively engaged in trading section 1256                   
          contracts and is registered with a domestic board of trade which            
          is designated as a contract market by the Commodities Futures               
          Trading Commission.”  The term “section 1256 contract” means any            
          regulated futures contract -- such as the U.S. Treasury bond                
          futures contracts in which petitioner traded.  Sec. 1402(i)(2)(C).          
               Petitioner argues that his trading activity in 1994 through            
          a broker did not occur in the normal course of his commodities              
          trading activity and therefore that section 1402(i) does not                
          apply.  Petitioner argues that his regular trading activity in              
          prior years (which involved petitioner’s personally making trades           
          on the floor of the CBOT) is distinguishable from the trades in             
          1994 which petitioner, because of the CFTC investigation,                   
          conducted through a floor broker.  Petitioner notes particularly            
          that he incurred $89,000 in broker’s fees relating to the latter            
          transactions.                                                               
               Respondent contends that throughout 1994 petitioner was a              
          commodities dealer and that the $1,541,926 in earnings petitioner           
          realized from his commodities futures trades is subject to self-            
          employment tax.                                                             








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