Steven A. and Patricia A. Knish - Page 6

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          fact and a decision may be rendered as a matter of law.  See Rule           
          121(b); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238                 
          (2002).  We conclude that there is no genuine issue of material             
          fact regarding whether petitioners and SPK made effective mark-             
          to-market elections for Mr. Knish and SPK’s securities trading              
          activity, and a decision may be rendered as a matter of law.                
               Respondent argues that petitioners and SPK failed to make              
          effective mark-to-market elections under section 475(f) pursuant            
          to Rev. Proc. 99-17, 1999-1 C.B. 503.  Respondent argues that               
          petitioners’ losses from the securities trading activity are                
          therefore capital losses regardless of whether the securities               
          trading activity was a trade or business.                                   
               Petitioners argue that as they are traders in securities,              
          they are entitled to ordinary loss treatment for their securities           
          trading losses in 2000 and 2001 (and their 100-percent share of             
          SPK’s securities trading losses) because they and SPK each made             
          effective mark-to-market elections under section 475(f).                    
          General Rules of the Mark-to-Market Accounting Method                       
               We begin by describing the general rules of the mark-to-               
          market accounting method.  A taxpayer engaged in a trade or                 
          business as a trader in securities may elect to recognize gain or           
          loss on any security held in connection with the trade or                   
          business at the close of the taxable year as if the security were           
          sold for its fair market value at yearend.  Sec. 475(f)(1)(A)(i);           
          see Lehrer v. Commissioner, T.C. Memo. 2005-167; Chen v.                    
          Commissioner, T.C. Memo. 2004-132.  In general, gains or losses             





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