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then began trading securities using SPK’s remaining funds and
petitioners’ own funds. He began trading securities in June 2000
and continued trading throughout 2001. Petitioners allocated the
income, expenses, gains, and losses that resulted from the
securities trading between petitioners and SPK.
Petitioners’ and SPK’s 1999 Tax Returns
Petitioners and SPK each timely filed a tax return for 1999
in April 2000. Neither petitioners nor SPK attached any
statement to the returns electing to use the mark-to-market
method of accounting under section 475(f).
Attempts To Make Mark-to-Market Elections
Petitioners and SPK each attempted in 2001 to make a mark-
to-market election for their securities trading activity,
intending that the elections be effective beginning in 2000.
Petitioners and SPK each filed Form 3115, Application for Change
in Accounting Method, with respondent and noted at the top that
the forms were filed pursuant to section 301.9100-2, Proced. &
Admin. Regs (section 9100). Petitioners filed their Form 3115 in
October 2001, and SPK filed its Form 3115 in September 2001.
Neither petitioners nor SPK submitted any other document to
respondent seeking to elect the mark-to-market method of
accounting.
Tax Returns for 2000 and 2001
Petitioners and SPK each timely filed their tax returns for
2000 and 2001. Petitioners and SPK each requested extensions to
file their 2000 returns and timely filed them in October 2001 and
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