Opinion ID: 608070
Heading Depth: 2
Heading Rank: 2

Heading: The Commissioner's Cross-Appeal

Text: 24 In her cross-appeal, the Commissioner questions whether the losses incurred as part of Holly's trading plan were deductible at all, i.e. even as capital losses. Under § 108(a) of the Deficit Reduction Act of 1984, as amended, a loss arising from one leg of a straddle entered into before 1982 is deductible only if such loss is incurred in a trade or business, or if such loss is incurred in a transaction entered into for profit though not connected with a trade or business. In the latter situation, a loss is deductible only if the transaction from which it arose was entered [301 U.S.App.D.C. 312] into primarily for profit. See, e.g., Landreth v. Commissioner, 859 F.2d 643, 647-49 (9th Cir.1988). 25 The Commissioner argues that the Tax Court erred in determining that all of Holly's losses were deductible although not incurred in a trade or business and in some cases not the result of a transaction entered into for profit. Specifically, the Commissioner points to the Tax Court's statement that [t]here clearly were some tax-motivated transactions by Holly.... Stoller, 60 T.C.M. (CCH) at 1564. The Stollers respond that the Tax Court actually and correctly determined that all of Holly's transactions were entered into for profit, and erred in determining that the losses were not incurred in a trade or business. We need not reach the taxpayers' second contention, since we agree with the first. The Tax Court stated that: 26 Although a portion of the trading in forward contracts was done in a manner specifically to minimize tax savings, i.e., the contract cancellations, those cancellations occurred because of the market conditions and a situation that arose after Holly entered into the initial trades. Therefore, Holly's intent at the time the trades were initially entered into was not to realize great tax savings, but to realize a profit from the trading as a whole. 27 Stoller, 60 T.C.M. (CCH) at 1564. In this context it is quite clear that the court meant only that the timing of some trades was tax motivated, not that Holly entered into any contracts without a profit motive. As we read it, therefore, the Tax Court found that the transactions were entered into for profit and that consequently the losses were deductible. The court's finding is amply supported by the record, and its conclusion follows inexorably.