Ivan K. Landreth Lucille Landreth v. Commissioner Internal Revenue Service

I

The principal issue in this case is whether the Landreths (taxpayers) can deduct losses from commodity futures “straddles,” incurred in 1978, if their primary motive for entering into those straddle transactions was to create tax losses rather than to realize a profit. Unless engaged in a trade or business, taxpayers can deduct losses from straddle transactions only if the losses are “incurred in a transaction entered into for profit” within the meaning of section 108 of the Deficit Reduction Act of 1984, Pub.L. No. 98-369, 98 Stat. 494, 630 (“section 108”). Our circuit and the Tenth Circuit have disagreed as to whether this language embodies an objective “reasonable prospect of any profit” standard or a subjective “primarily for profit” stan dard. In Wehrly v. United States, 808 F.2d 1311 (9th Cir.1986), our circuit interpreted the language of section 108 as “re-quirting] the investor to have only a reasonable expectation of a profit. Profit must be a motive but not necessarily the primary motive for entering into a transaction.” Id. at 1312 . In Miller v. Commissioner, 836 F.2d 1274 (10th Cir.1988), the Tenth Circuit, expressly disagreeing with Wehrly , interpreted section…