Court Opinion

ID: 4485485
Source: CourtListenerOpinion
Date Created: 2020-01-16 21:17:27.916113+00
Date Added: 2024-06-11T15:04:27.991877
License: Public Domain

SIMPSON, J., dissenting: A decision in this case requires us to revisit Miller v. Commissioner, 84 T.C. 827 (1985), on appeal (10th Cir., Nov. 20, 1985). I remain of the view that we made a mistake in Miller, and we are compounding that mistake by the decision of the majority in this case. In Miller, we did not apply thé presumption of section 108(b); here, we have a dealer or trader, who is entitled to that presumption. In describing the effect of the presumption, the committee report states, “the provision is to be applied by presuming that the position is held as part of a transaction entered into for profit unless the Internal Revenue Service establishes to the contrary.” H. Rept. 98-861 (Conf.)(1984), 1984-3 C.B. (Vol. 2) 1, 171. Thus, even a dealer or trader is not automatically entitled to deduct his losses. There is still a question of whether the transaction was entered into for profit, but the Commissioner has the burden of proving that the dealer did not have a profit motive. The regulations provide that in determining whether a transaction was entered into for profit, one factor to be considered is “the extent of straddle transactions having tax results disproportionate to economic consequences.” Sec. 1.165-13T, A-5, Temporary Income Tax Regs. Such regulation does not provide that merely because there are large tax losses, the for-profit test is failed and the losses are disallowed. The regulation merely requires that the extent of tax losses and economic gains be considered in determining whether the transaction was entered into for profit. The majority concludes that since dealers and traders ordinarily have large tax losses, a test that considers such losses is invalid. However, in my view, it is altogether appropriate to examine the results of the dealer’s trading to ascertain whether he, in fact, realizes any significant economic gains. I cannot believe that Congress meant to allow a deduction for losses where a dealer persistently and deliberately incurred large tax losses, and no economic gains. The economic gains need not equal the losses, but where there is a continuing history of no economic gains, and no reasonable prospect of economic gains, I am convinced that Congress did not intend to allow the use of tax losses to defer the reporting of income. In summary, I remain of the view that section 108 was not intended to alter the historic for-profit test. Under section 108(b), there still must be a determination of whether the transaction was entered into for profit; that provision merely shifts to the Commissioner the burden of proving that the taxpayer lacked a profit motive. Chabot, Parker, Shields, and Jacobs, JJ., agree with this dissent.