- 6 - property * * * that is held or to be held by the taxpayer; or (2) To reduce risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, by the taxpayer. C. Discussion At trial, Mr. Welter testified that he engaged in commodities trading primarily “to reduce the risk from the grain that we have to buy.” However, petitioners stipulated that they did not produce any commodities during the years at issue and the corporations conducted all of the farming operations in question. Essentially, petitioners contend that they and the corporations should be treated as a single economic unit for purposes of applying former section 1.1221-2(b). Unfortunately for petitioners, their position is undercut both by the language of former section 1.1221-2(b) and by long- standing principles of Federal income taxation. Former section 1.1221-2(b) clearly contemplates that, in order for a transaction to qualify as a hedging transaction, the taxpayer entering into the transaction and the taxpayer whose risk is thereby hedged must be one and the same. Furthermore, it is axiomatic that: (1) Absent extraordinary circumstances, a corporation’s business is not attributable to its shareholders for tax purposes, see Burnet v. Clark, 287 U.S. 410 (1932), and (2) a person who chooses the corporate form to conduct his business activities mayPage: Previous 1 2 3 4 5 6 7 8 9 Next
Last modified: May 25, 2011