Herman N. and Veronica Welter - Page 7

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          not subsequently disregard that form in order to gain a tax                 
          advantage, see Moline Props., Inc. v. Commissioner, 319 U.S. 436            
               We recently decided a case presenting a question similar to            
          the question in this case.  In Pine Creek Farms, Ltd. v.                    
          Commissioner, T.C. Memo. 2001-176, the taxpayer-corporation                 
          raised corn, soybeans, and cattle.  It also engaged in                      
          commodities trading activities involving corn, soybeans, cattle,            
          and hogs, treating the losses therefrom as ordinary losses.  The            
          Commissioner recharacterized the portion of the overall loss                
          attributable to hog futures as a capital loss, notwithstanding              
          that the taxpayer’s majority shareholder was a major shareholder            
          of two other closely held corporations that conducted hog                   
          farrowing and hog finishing operations, respectively.  In                   
          upholding respondent’s determination, we stated:                            
               Therefore, the business transactions of * * * [the                     
               corporations engaged in the hog business] cannot be                    
               attributed to * * * [the common shareholder] and from *                
               * * [the common shareholder] 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 * * * [the common shareholder] 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.  * * *                                                     
               Under the reasoning of Pine Creek Farms, Ltd. v.                       
          Commissioner, supra, the business activities of the corporations            
          cannot be attributed to Mr. Welter.  Petitioners do not argue               

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