- 23 -
subdivision (iii) applies; i.e., whether petitioner had the
benefit of hindsight in requesting relief.
Petitioner contends that, had he been aware of its
existence, he would have made the section 475(f) election on
time. Petitioner further contends that, because his total losses
on the day he actually filed the election were exactly the same
as they would have been if he had timely filed, he did not use
hindsight in requesting relief.
Respondent contends that allowing petitioner an extension of
time to make the election impermissibly gives petitioner the
benefit of hindsight. Respondent’s brief poses the following
hypothetical:
For the securities trader who has unrealized losses,
the decision to mark-to-market his securities is a good
one. Not only can he recognize his unrealized losses
at the end of the year, but those losses are also
ordinary losses which can be offset against ordinary
income. However, for the securities trader who has
unrealized gains at the end of the year, he may regret
the decision of electing the mark-to-market method of
accounting because his unrealized gains are also
accelerated and must be recognized at the end of the
year as ordinary income.[14]
We reject respondent’s hypothetical, as well as respondent’s
contention. Respondent’s contention is not consistent with the
plain reading of section 301.9100-3(b)(iii), Proced. & Admin.
14An implicit contention in respondent’s hypothetical is
that a taxpayer with unrealized gains will not make the mark-to-
market election because it will result in ordinary income
treatment and will instead wait for the required time to pass to
get the benefit of capital gains.
Page: Previous 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 NextLast modified: May 25, 2011