T.C. Memo. 2003-299
UNITED STATES TAX COURT
HERMAN N. AND VERONICA WELTER, Petitioners v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 5041-01. Filed October 29, 2003.
Ps incorporated their farming operations in 1993.
Prior to the incorporation, P-H engaged in commodities
trading activities through several brokerage accounts.
After the incorporation, P-H continued to engage in
such activities through those accounts. Ps treated the
gains and losses from P-H’s commodities trading
activities as ordinary income or loss, as applicable,
on their 1994-96 Federal income tax returns.
Held: Since P-H’s commodities trading activities
do not constitute hedging transactions, gains and
losses therefrom are capital in nature.
Held, further, Ps are liable for penalties under
sec. 6662, I.R.C., as determined by R.
Bob A. Goldman, for petitioners.
Lisa K. Hartnett, for respondent.
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