Paul D. Dunlap and Shirley A. Dunlap, Hawkeye Bancorporation v. Commissioner of Internal Revenue

BRIGHT, Circuit Judge.

This appeal by the Commissioner of Internal Revenue challenges a determination by the tax court that taxpayer Hawkeye *786Bancorporation (Hawkeye)1 sustained a deductible loss of $35,000 in 1973 as a result of a lapsed option. The Commissioner disallowed the deduction on grounds that the option did not lapse because Hawkeye retained several consecutive one-year options exercisable in years subsequent to 1973. In proceedings in the tax court contesting the deficiencies in Hawkeye’s 1973 federal income tax return, see 26 U.S.C. § 442, the tax court ruled that the option had…