87 T.C. 1087 (1986), 4054-79, Glass v. C.I.R.

Docket Nº:31327-81, 31348-81, 31349-81, 31350-81, 31536-81, 31589-81, 31614-81, 183-82, 678-82, 706-82, 776-82, 784-82, 849-82, 890-82, 993-82, 1199-82,1235-82, 1295-82, 1347-82, 1353-82, 1496-82, 1536-82, 1568-82, 1775-82, 1790-82, 1813-82, 1834-82, 1841-82, 1982-82, 2018-82, 2080-82, 2283-82, 2284-82, 2285-82, 2286-82, 2287-82, 2293-82, 2299-82, 2300-82, 2
Citation:87 T.C. 1087
Opinion Judge:NIMS, JUDGE:
Party Name:BARRY S. GLASS, SHIRLEY P. GLASS, ET AL., [1]Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Attorney:Martin M. Ruken, Robert E. Kolek, Kenneth C. Shepro, Herbert L. Zarov, John S. Pennish, R. LaMar Bishop, and Gary S. Vandeweghe, for the petitioners. Stephen M. Miller and Carolyn A. Boyer, for the respondent.
Judge Panel:GERBER, J., did not participate in the consideration of this case.
Case Date:November 17, 1986
Court:United States Tax Court
 
FREE EXCERPT

Page 1087

87 T.C. 1087 (1986)

BARRY S. GLASS, SHIRLEY P. GLASS, ET AL., [1]Petitioners

v.

COMMISSIONER OF INTERNAL REVENUE, Respondent

Nos. 31327-81, 31348-81, 31349-81, 31350-81, 31536-81, 31589-81, 31614-81, 183-82, 678-82, 706-82, 776-82, 784-82, 849-82, 890-82, 993-82, 1199-82,1235-82, 1295-82, 1347-82, 1353-82, 1496-82, 1536-82, 1568-82, 1775-82, 1790-82, 1813-82, 1834-82, 1841-82, 1982-82, 2018-82, 2080-82, 2283-82, 2284-82, 2285-82, 2286-82, 2287-82, 2293-82, 2299-82, 2300-82, 2308-82, 2334-82, 2475-82, 2648-82, 2776-82, 2782-82, 2844-82, 2881-82, 2906-82, 3122-82, 3280-82, 3406-82, 3408-82, 3432-82, 3519-82, 3534-82, 3535-82, 3537-82, 3538-82, 3627-82, 3685-82, 3770-82, 3794-82, 3864-82, 3874-82, 3968-82, 3969-82, 4000-82, 4001-82, 4002-82, 4003-82, 4004-82, 4005-82, 4006-82, 4007-82, 4008-82, 4009-82, 4010-82, 4011-82, 4017-82, 4160-82, 4509-82, 4518-82, 4629-82, 4630-82, 4631-82, 4763-82, 4764-82, 4821-82, 4907-82, 4993-82, 5070-82, 5072-82, 5074-82, 5228-82, 5229-82, 5337-82, 5442-82, 5529-82, 5661-82, 5868-82, 5869-82, 5870-82, 5871-82, 5872-82, 5873-82, 5907-82, 5908-82, 5915-82, 5924-82, 5936-82, 5957-82, 6063-82, 6116-82, 6139-82, 6200-82, 6365-82, 6382-82, 6395-82, 6557-82, 6828-82, 6837-82, 6838-82, 6839-82, 6841-82, 6850-82, 6857-82, 6870-82, 7045-82, 7121-82, 7128-82, 7310-82, 7786-82, 7808-82, 7977-82, 8074-82, 8413-82, 8415-82, 8580-82, 8739-82, 10129-82, 10287-82, 10444-82, 10622-82, 10623-82, 11087-82, 11810-82, 11811-82, 12000-82, 12809-82, 12926-82, 13062-82, 13241-82, 13242-82, 13285-82, 13320-82 13415-82, 13617-82, 13667-82, 13689-82, 13998-82, 14197-82, 14309-82, 14310-82, 14311-82, 14312-82, 14313-82, 14314-82, 14315-82, 14470-82, 14712-82, 14731-82, 14732-82, 14733-82, 14803-82, 14856-82, 14949-82, 14959-82, 14960-82, 14961-82, 14968-82, 14969-82, 15002-82, 15007-82, 15018-82, 15058-82, 15073-82, 15094-82, 15097-82, 15260-82, 15646-82, 15704-82, 15788-82, 15844-82, 15914-82, 16284-82, 16285-82, 16350-82, 16419-82, 16629-82, 16630-82, 16631-82, 16632-82, 16753-82, 17308-82, 17311-82, 17452-82, 17453-82, 17460-82, 17463-82, 17853-82, 17917-82, 18399-82, 18400-82, 18401-82, 19184-82, 19185-82, 19318-82, 19488-82, 20138-82, 20423-82, 20983-82, 21016-82, 21282-82, 22277-82, 22783-82, 24028-82, 24371-82, 25066-82, 25070-82, 25174-82, 25411-82, 25506-82, 26314-82.

United States Tax Court

November 17, 1986

         During certain of the years in issue petitioners engaged in commodity straddle transactions connected with trading on the London Metal Exchange. Petitioners intentionally sustained losses in Year One of their commodity straddle transactions by entering into closing transactions on their sold commodity options. HELD, since the intentionally realized losses were not necessary or helpful in profiting from difference gains in petitioners' commodity straddle transactions, the transactions lacked a business or profit-making purpose. The losses were not ‘ intended‘ by sections 165(c) and 1234, I.R.C. 1954, and section 108 of the Tax Reform Act of 1984, Pub. L. 98-369, as amended by section 1808 of the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. ____. They were therefore shams in substance. Gregory v. Helvering, 293 U.S. 465 (1935); Falsetti v. Commissioner, 85 T.C. 332 (1985).

Page 1091

          Martin M. Ruken, Robert E. Kolek, Kenneth C. Shepro, Herbert L. Zarov, John S. Pennish, R. LaMar Bishop, and Gary S. Vandeweghe, for the petitioners.

         Stephen M. Miller and Carolyn A. Boyer, for the respondent.

          NIMS, JUDGE:

         In these consolidated cases, respondent determined aggregate deficiencies in excess of $61 million in petitioners' Federal income taxes for the years 1975 through 1980.[2]

         Each of the petitioners in these cases entered into a series of transactions herein sometimes referred to for convenience as the London Options Transaction. The issues for decision are:

         (1) whether the London Options Transactions are shams; and

         (2) if the transactions are not shams, whether they were entered into for profit under the standard set forth in Section 108 of the Tax Reform Act of 1984.[3]

         Petitioners in the following docket numbers resided (or, if corporations, had their principal places of business or office) in Massachusetts at the time their respective petitions were filed:

         18692-80, 19753-80, 20768-80 and 14968-82.

         Petitioners in the following docket numbers resided (or, if corporations, had their principal places of business or office) in either New York, Connecticut or Vermont at the time their respective petitions were filed: 13835-79, 1627-80, 9423-80, 9746-80, 9747-80, 9748-80, 10902-80, 11811-80, 12144-80, 19750-80, 19897-80, 19898-80, 4841-81, 11717-81,

Page 1092

11718-81, 12324-81, 19181-81, 20627-81, 23591-81, 24091-81, 24604-81, 24755-81, 26700-81, 27400-81, 27719-81, 30709-81, 31186-81, 31188-81, 31190-81, 31191-81, 31192-81, 31262-81, 31278-81, 31299-81, 31327-81, 1347-82, 1982-82, 2018-82, 3280-82, 3770-82, 7128-82, 10129-82, 10287-82 and 13415-82.

         Petitioners in the following docket numbers resided (or, if corporations, had their principal places of business or office) in either New Jersey or Pennsylvania at the time their respective petitions were filed: 13142-80, 15770-80, 15771-80, 16558-80, 17351- 80, 21188-80, 2459-81, 7214-81, 13809-81, 13810-81, 28496-81, 25066- 82, 25070-82 and 25174-82.

         Petitioners in the following docket numbers resided (or, if corporations, had their principal place of business or office) in either North Carolina or Maryland at the time their respective petitions were filed: 321-80, 6906-80, 12976-80, 17069-80, 22085-80, 22195-80, 5194-81, 6377-81, 6500-81, 6929-81, 7113-81, 7698-81, 8020- 81, 8573-81, 8586-81, 9395-81, 10196-81, 11621-81, 11846-81, 11892- 81, 11929-81, 12742-81, 13026-81, 13664-81, 14058-81, 14776-81, 20338-81, 22418-81 and 776-82.

         Petitioners in the following docket numbers resided (or, if corporations, had their principal place of business or office) in either Texas or Louisiana at the time their respective petitions were filed: 5544-79, 5395-80, 5396-80, 5397-80, 5398-80, 5399-80, 5400-80, 5401-80, 6315-80, 10721-80, 12901-80, 15592-80, 16656-80, 17117-80, 17457-80, 19492-80, 21817-80, 5540-81, 9926-81, 12841-81, 23475-81, 23544-81, 25348-81, 25349-81, 25877-81, 25879-81, 27633-81, 27634-81, 993-82, 3794-82, 5907-82, 5908-82, 11087-82 and 16285-82.

         Petitioners in the following docket numbers resided (or, if corporations, had their principal place of business or office) in either Michigan or Kentucky at the time their respective petitions were filed: 3565-80, 3566-80, 3568-80, 538-81, 7213-81, 2475-82 and 20983-82.

         Petitioners in the following docket numbers resided (or, if corporations, had their principal place of business or office) in either Illinois or Indiana at the time their respective petitions were filed: 15145-79, 16358-79, 9060-80,

Page 1093

10642-80, 10643-80, 11067- 80, 11068-80, 11173-80, 11174-80, 11175-80, 11176-80, 11177-80, 11195-80, 11205-80, 11206-80, 11207-80, 11216-80, 11605-80, 11755-80, 11756-80, 11757-80, 12609-80, 13223-80, 17336-80, 19419-80, 20531-80, 3561-81, 4987-81, 6762-81, 6763-81, 6764-81, 7851-81, 7852-81, 8431- 81, 8432-81, 8434-81, 8545-81, 9501-81, 12878-81, 13276-81, 13898-81, 13913-81, 15875-81, 18428-81, 20514-81, 23324-81, 25639-81, 29423-81, 706-82, 3408-82, 3432-82, 5442-82, 5957-82, 6839-82, 10622-82, 13667- 82, 14309-82, 14310-82, 14311-82, 14312-82, 14313-82, 14314-82, 14315-82, 14731-82, 14732-82, 14733-82, 14959-82, 14961-82, 15058-82, 15073-82, 15094-82 15844-82, 15914-82, 16629-82, 16630-82, 16631-82,[4] 16632-82, 17452-82, 17453-82, 17460-82, 20423-82 and 22783-82.

         Petitioners in the following docket numbers resided (or, if corporations, had their principal place of business or office) in either Missouri, Nebraska, Minnesota or Iowa at the time their respective petitions were filed: 12417-80, 17810-81, 17838-81, 19173- 81, 25880-81, 2299-82, 8074-82 and 10623-82.

         Petitioners in the following docket numbers resided (or, if corporations, had their principal place of business or office) in either Utah, Wyoming, Colorado, Kansas or Oklahoma at the time their respective petitions were filed: 8146-79, 8147-79, 8148-79, 8150-79, 8151-79, 8152-79, 8153-79, 8156-79, 8157-79, 8158-79, 8160-79, 8161- 79, 8163-79, 8720-79, 9118-79, 9457-79, 9580-79, 9590-79, 9698-79, 9699-79, 9700-79, 12157-79, 15591-79, 1142-80, 1243-80, 1339-80, 2872-80, 2875-80, 3279-80, 3705-80, 4000-80, 4036-80, 4174-80, 4567- 80, 8587-80, 8905-80, 9084-80, 9443-80, 10660-80, 10929-80, 11017-80, 11737-80, 11739-80, 11745-80, 11748-80, 11781-80, 11782-80, 11952-80, 12029-80, 12030-80, 12197-80, 12198-80, 12199-80, 12203-80, 12204-80, 12207-80, 12213-80, 12214-80, 12216-80, 12218-80, 12219-80, 12221-80, 12224-80, 12225-80, 12226-80, 12229-80, 12232-80, 12233-80, 12236-80, 12237-80, 12238-80, 12241-80, 12246-80, 12247-80, 12249-80, 12250-80, 12252-80, 12253-80, 12254-80, 12255-80, 12261-80, 12262-80, 12263-80, 12264-80, 12265-80, 12266-80, 12267-80, 12268-80, 12269-80, 12270-80, 12273-80, 12274-80, 12610-80, 12619-80, 13125-80, 13162-80,

Page 1094

13199-80, 13540-80, 16204-80, 16319-80, 16556-80, 16557-80, 16560-80, 16563-80, 16681-80, 17148-80, 18137-80, 19395-80,[5] 19396-80,[6] 19664-80, 19665-80, 19666-80, 19669-80, 19670-80, 20078-80, 20079-80, 20292-80, 20293-80, 20295-80, 20296-80, 20297-80, 20298-80, 20299-80, 20362-80, 20522-80, 20697-80, 20699-80, 20700-80, 20701-80, 20703-80, 20770-80, 20771-80, 20847-80, 21035-80, 21036-80, 21037-80, 21039-80, 21126-80, 21127-80,...

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