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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 may
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