Opinion ID: 729795
Heading Depth: 2
Heading Rank: 1

Heading: The Stock Option Transactions

Text: 5 On its tax returns for 1982-85, MTH claimed millions of dollars of ordinary losses resulting from stock option transactions. The IRS sought to disallow at least $28 million of these losses in their entirety on the grounds that MTH entered into the stock option transactions primarily to generate tax losses and not for profit, see I.R.C. § 165(c), and that the transactions did not have the requisite economic substance to warrant recognition of the resulting losses. See Treas. Reg. § 1.165-1(b). As a fallback position, the IRS argued that MTH did not qualify as a dealer in stock options and therefore the losses must be treated not as ordinary losses, but rather as capital losses. See I.R.C. § 1221(1).