Clemon J. And Ivy C. Herrington v. Commissioner of Internal Revenue

JOHNSON, Circuit Judge:

Taxpayers appeal a Tax Court decision upholding gain on the second half of a “straddle” transaction adjudged a sham by the Tax Court in a companion case. Because we hold that the “duty of consistency” doctrine estops the taxpayers from relying on the sham transaction holding, we affirm.

I. BACKGROUND

From 1976 through 1978, Clemon and Ivy Herrington carried out a series of “straddle” transactions on the London Metal Exchange. These transactions made use of futures contracts pairing “put options” (rights to sell) and “call options” (rights to buy) in such a way as to…