Farmers & Ginners Cotton Oil Co. v. Commissioner
United States Board of Tax Appeals
CAPITAL ASSETS - HEDGING. - Purchases and sales of refined cottonseed oil futures by a manufacturer of crude cottonseed oil made entirely as a hedge or protection against the forced sale of perishable crude cottonseed oil at unsatisfactory prices, held, to relate directly to its business of the manufacture and sale of crude cottonseed oil, and losses sustained in such transactions were not capital losses subject to the deduction limitation of section 117 of the Revenue Act…
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CAPITAL ASSETS - HEDGING. - Purchases and sales of refined cottonseed oil futures by a manufacturer of crude cottonseed oil made entirely as a hedge or protection against the forced sale of perishable crude cottonseed oil at unsatisfactory prices, held, to relate directly to its business of the manufacture and sale of crude cottonseed oil, and losses sustained in such transactions were not capital losses subject to the deduction limitation of section 117 of the Revenue Act of 1934.
1Opinion of the Court
*1085OPINION.
Murdock :
The question here is substantially the same as that considered in the case of Ben Grote, 41 B. T. A. 247. The only purpose which the petitioner had in buying the futures in refined oil was to attempt to avoid loss upon the crude oil which it was manufacturing. This method was as effective a hedge against loss on its operations as was available to the petitioner. Its raw material was cottonseed, but there was no futures market for that and no hedge could be made by purchases thereof. It did not buy the futures merely as a speculation, but solely to replace its manufactured…
2Cited by13 opinions
- Hoover Co. v. CommissionerUnited States Tax Court · 1979
- Commissioner of Internal Rev. v. Farmers & G C. Oil Co.Court of Appeals for the Fifth Circuit · 1941
- Corn Products Refining Company v. Commissioner of Internal RevenueCourt of Appeals for the Second Circuit · 1954
- International Flavors & Fragrances, Inc. v. CommissionerUnited States Tax Court · 1974
- Wool Distributing Corp. v. CommissionerUnited States Tax Court · 1960
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