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status as a nominee with no control over the funds in the account
dissociates her from the London straddle.
As stated previously, petitioner did not derive a
significant benefit from the gains in her account. Most of
petitioner’s $3.5 million gain in 1983 was used by Mr. Campbell
to offset the losses he sustained in Refco Foods Too. The money
invested in the London straddle was never returned to petitioner.
As a result of the London straddle transactions, petitioner lost
access to $2.6 million in her Refco account, and there is no
evidence that petitioner benefited from the $314,000 tax refund
the Campbells received from their 1983 taxes.
Further, the London straddle was a series of sophisticated
transactions that looked legitimate on paper. A reasonable
person with petitioner’s educational background, devoid of any
specific knowledge in options trading, could not be expected to
discover that the trades were fictitious. It took a complex
Federal investigation to figure out that the trades were not
legitimate. As the Court of Appeals for the Second Circuit
commented when it considered the status of a spouse whose husband
invested in a transaction designed as an income tax shelter:
“‘[courts] recognize that in the bewildering world of tax shelter
deductions, few experts, let alone laypersons, easily discern the
difference between a fraudulent scheme and an exceptionally
advantageous legal loophole in the tax code.’” Resser v.
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