                         T.C. Memo. 1997-422



                       UNITED STATES TAX COURT



                  BEVERLY GORDON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent

                  RONALD GORDON, Petitioner v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent*



     Docket Nos. 9887-95, 9900-95.       Filed September 22, 1997.



     Vincent R. Barrella, for petitioner in docket No. 9887-95.

     Ronald Gordon, pro se in docket No. 9900-95.

     Rajiv Madan and Anthony J. Kim, for respondent.



                 SUPPLEMENTAL MEMORANDUM OPINION

     CHIECHI, Judge:    This case is before us on the motion filed


*
   This Opinion supplements our previously filed Memorandum
Findings of Fact and Opinion in Gordon v. Commissioner, T.C.
Memo. 1997-193, filed Apr. 24, 1997.
                                 - 2 -

by Ronald Gordon (Mr. Gordon) and the motion filed by Beverly

Gordon (Ms. Gordon) for reconsideration1 of certain findings in

our Opinion in Gordon v. Commissioner, T.C. Memo. 1997-193

(Opinion).2   We incorporate our Opinion herein by this reference.

     The granting of a motion for reconsideration rests within

the discretion of the Court.     Estate of Quirk v. Commissioner,

928 F.2d 751, 759 (6th Cir. 1991), affg. in part and remanding in

part T.C. Memo. 1988-286; Klarkowski v. Commissioner, 385 F.2d

398, 401 (7th Cir. 1967), affg. T.C. Memo. 1965-328.    A motion

for reconsideration will be denied unless unusual circumstances

or substantial error is shown.     Estate of Quirk v. Commissioner,

supra at 759.   It is the policy of this Court to try all issues

raised in a case in one proceeding to avoid piecemeal and pro-

tracted litigation.   Haft Trust v. Commissioner, 62 T.C. 145, 147

(1974), affd. on this issue 510 F.2d 43, 45 n.1 (1st Cir. 1975).

A motion for reconsideration generally will not be granted to

resolve issues that are raised for the first time in such a


1
    Ms. Gordon's motion for reconsideration was accompanied by a
memorandum in support thereof. We shall refer collectively to
that motion and that memorandum as either Ms. Gordon's motion for
reconsideration or Ms. Gordon's motion. We shall refer to Mr.
Gordon's motion for reconsideration as either Mr. Gordon's motion
for reconsideration or Mr. Gordon's motion.
2
    Respondent filed a separate notice of objection to each of
those motions and a memorandum in support of the notice of
objection to Ms. Gordon's motion. The Court permitted Ms. Gordon
to file a response to Mr. Gordon's motion and permitted Mr.
Gordon to file a response to Ms. Gordon's motion. However,
neither Ms. Gordon nor Mr. Gordon filed such a response.
                                - 3 -

motion, Stoody v. Commissioner, 67 T.C. 643, 644 (1977), or to

hear arguments that could have been made before the filing of an

opinion, Estate of Trenchard v. Commissioner, T.C. Memo. 1995-

232.    Moreover, as we observed in Koufman v. Commissioner, 69

T.C. 473, 476-477 (1977):

       This Court has an extraordinarily heavy volume of
       cases, and in many of them, the Court decides an issue
       against one of the parties because of his failure to
       carry his burden of proof or to perform some other act.
       If the Court granted a second chance to every party who
       lost because of his failure to act in some manner, the
       Court clearly could not keep abreast of its work. In
       effect, we would be telling the parties that if they
       were not satisfied with the first decision, try again.
       However, on previous occasions, we have denied a peti-
       tioner's motion to vacate the decision and reconsider
       the opinion where the only basis for these motions was
       the petitioner's unexcused failure to raise certain
       issues earlier. * * *

Similarly, in denying the taxpayers' motion for reconsideration

in Long v. Commissioner, 71 T.C. 724, 727 (1979), remanded on

another issue 660 F.2d 416 (10th Cir. 1981), we observed:

            A party is entitled to have his day in court; both
       parties are entitled to this, but neither party is
       entitled to have more than one fair, reasonable oppor-
       tunity to establish his claim or defense. To allow
       more would be to protract litigation to the extent
       which would preclude the administration of justice.
       [Selwyn Operating Corp. v. Commissioner, 11 B.T.A. 593,
       595 (1928).]

            The parties cannot try their cases with hind-
       sight.

       By way of background, we shall restate certain of the

findings and conclusions in our Opinion that are pertinent to our

consideration of the respective motions for reconsideration of
                                - 4 -

Mr. Gordon and Ms. Gordon.   In our Opinion, we addressed Mr.

Gordon's contention that the Court should reject respondent's

determination that he and Ms. Gordon (petitioners) are not

entitled to the net operating loss deduction for 1988 (claimed

1988 NOL deduction), which petitioners claimed in the joint

Federal income tax return (return) that they filed for that year

and which is attributable to an alleged net operating loss

carryover from their taxable year 1986.3   Resolution of that

issue turned on whether a net trading loss that Mr. Gordon

sustained from his activities as an options market maker during

1986 (1986 net trading loss) constituted an ordinary loss, as Mr.

Gordon contended, or a capital loss, as respondent contended.    On

the record before us, we found that Mr. Gordon failed to show

(1) that the 1986 net trading loss constituted a capital loss and

(2) that petitioners are entitled to the claimed 1988 NOL deduc-

tion.   In so holding, we found on the record presented to us (1)

that pursuant to section 1256(f)(3)(A),4 the 1986 net trading

loss is treated as a loss from the sale or exchange of a capital

asset and (2) that Mr. Gordon failed to establish that the

hedging exception in section 1256(f)(3)(B) applies to any portion

of his 1986 net trading loss.

3
   Ms. Gordon did not contend that she and Mr. Gordon are en-
titled to the claimed 1988 NOL deduction; instead she agreed to
be bound by the Court's holding on that issue.
4
   All section references are to the Internal Revenue Code in
effect for the years at issue.
                               - 5 -

     We next addressed in our Opinion Mr. Gordon's contention

that respondent is equitably estopped from claiming that peti-

tioners are not entitled to the claimed 1988 NOL deduction

(equitable estoppel issue).   We rejected Mr. Gordon's contention

because we found on the record presented to us that Mr. Gordon

failed to show that the doctrine of equitable estoppel should be

applied against respondent.

     The final matter we addressed in our Opinion was Ms.

Gordon's contention that she qualifies for innocent spouse relief

under section 6013(e)(1) with respect to the portion of petition-

ers' understatement of tax for 1988 that is attributable to the

claimed 1988 NOL deduction (innocent spouse issue).   In rejecting

her contention, we stated:

     Ms. Gordon does not even claim that Mr. Gordon did not
     hold the options in question for the purposes specified
     in section 1256(f)(3)(B), let alone that there was no
     substantial argument that can be made that he so held
     any of those options. Ms. Gordon could have developed
     the record in order to attempt to establish that Mr.
     Gordon did not hold the options that generated his 1986
     net trading loss for the purposes specified in section
     1256(f)(3)(B). However, she failed to do so. [Gordon
     v. Commissioner, T.C. Memo. 1997-193.]

We found on the record presented to us that Ms. Gordon failed to

show (1) that there is no basis in fact or in law within the

meaning of section 6013(e)(2)(B) for the claimed 1988 NOL deduc-

tion and (2) that that item constitutes a grossly erroneous item

within the meaning of that section.    We held that therefore Ms.

Gordon is not entitled to innocent spouse relief under section

6013(e)(1).
                               - 6 -

Mr. Gordon's motion

     In his motion for reconsideration, Mr. Gordon asks that we

reconsider our holding with respect to the equitable estoppel

issue.   In that motion, Mr. Gordon essentially restates the

arguments that he made on brief and has not shown any unusual

circumstances or substantial error.    Accordingly, we shall deny

Mr. Gordon's motion.

Ms. Gordon's Motion

     In her motion for reconsideration, Ms. Gordon asks that we

reconsider our holding with respect to the innocent spouse issue

and for the first time advances arguments relating to the impact

of section 1256(f)(3)(B) and Mr. Gordon's alleged hedging activi-

ties on the resolution of that issue.   Ms. Gordon argues that we

erred in finding that she failed to show that the 1988 NOL

deduction is a grossly erroneous item within the meaning of

section 6013(e)(2)(B) because "respondent has never contended

that Mr. Gordon's hedging allegations, or the existence of

§1256(f)(3)(B), provided a basis for finding that his claimed

1986 net trading loss did not constitute a grossly erroneous

item."   Ms. Gordon had the burden of proving that she satisfied

the requirements of section 6013(e)(2)(B).   Her burden was not

altered as a result of respondent's having advanced in support of

respondent's position under section 6013(e)(2)(B) reasons other

than those relating to the hedging exception in section

1256(f)(3)(B), which other reasons we rejected in our Opinion.      A
                               - 7 -

deficiency may be approved on the basis of reasons other than

those relied upon by respondent and even where respondent's

reasons are incorrect.   Wilkes-Barre Carriage Co. v. Commis-

sioner, 39 T.C. 839, 845 (1963), affd. 332 F.2d 421 (2d Cir.

1964).

     It is Ms. Gordon's position that she does not have the

burden of showing that there is no basis in fact or in law under

section 1256(f)(3)(B) for treating any portion of the 1986 net

trading loss as an ordinary loss.   Alternatively, it is Ms.

Gordon's position that if she did have that burden, we erred in

finding in our Opinion that she failed to satisfy it.   Ms.

Gordon's positions are grounded on her view that the Court

decided the innocent spouse issue "against the backdrop of its

erroneous conclusion that Mr. Gordon claimed that he held most of

his options for the purposes specified in §1256(f)(3)(B)".

Although we acknowledge here, as we did in our Opinion, that Mr.

Gordon's position was not altogether clear, we were satisfied

when we issued our Opinion (as was respondent at trial and on

brief), and we are satisfied now, that Mr. Gordon did claim that

he held most of the options that generated the 1986 net trading

loss for the purposes specified in section 1256(f)(3)(B).

Indeed, Mr. Gordon stated in his trial memorandum submitted prior

to trial and throughout his opening and answering briefs submit-

ted after trial that the 1986 net trading loss constituted an
                               - 8 -

ordinary, and not a capital, loss because of the hedging nature

of his transactions.5

     Ms. Gordon contends that even if Mr. Gordon had claimed that

he held most of the options that generated the 1986 net trading

loss for the purposes specified in section 1256(f)(3)(B), she

nonetheless satisfied her burden of proof under section

6013(e)(2)(B).   That is because, according to Ms. Gordon, the

"record clearly establishes that Mr. Gordon did not hold any of

his options for the purposes specified in §1256(f)(3)(B), and

that §1256(f)(3)(B) does not provide a substantial legal argument

for Mr. Gordon's claimed ordinary loss deduction in 1986."    To

support her position, Ms. Gordon points, inter alia, to Mr.

Gordon's testimony that (1) he used certain options to hedge the

risks that were associated with certain other options, (2) he

used common stock to hedge the risks that were associated with

certain other options, and (3) he held the common stock that he

had in his "account" as a "hedge."     Based on that testimony, Ms.

Gordon concludes that the hedging activities about which Mr.

Gordon testified were the only hedging activities in which he was

involved and that Mr. Gordon did not use the options that gener-

ated the 1986 net trading loss to hedge the risks that were


5
   For example, Mr. Gordon contended in his answering brief that
"IRC Code 1256 Treas Reg. 1.1221-2 states" that "To qualify for
ordinary treatment as a hedging transaction taxpayer must show
that the options served to reduce risk with respect to ordinary
property".
                                - 9 -

associated with any other property that he owned.   As the finder

of fact, when we issued our Opinion we were, and we are now,

unable to make any such findings based on the record presented to

us in these cases.   We found Mr. Gordon's testimony regarding his

alleged hedging activities to be general, vague, and conclusory

and found the entire record before us to be unclear about the

nature and extent of any such activities.   That is precisely why

we found that Mr. Gordon failed to establish that he held the

options that generated the 1986 net trading loss for the purposes

specified in section 1256(f)(3)(B), rather than finding that the

record established that he did not so hold those options.6

However, as we stated in our Opinion, that finding "does not

necessarily mean that Mr. Gordon did not hold any of the options

that generated his 1986 net trading loss for the purposes speci-

fied in section 1256(f)(3)(B)."   Our review of the entire record

in these cases left a question in our mind about whether or not

Mr. Gordon was engaged in hedging activities during 1986 that fit

within section 1256(f)(3)(B).   That question was reinforced by

Mr. Gordon's claims in his trial memorandum as well as throughout

his opening and answering briefs that the 1986 net trading loss



6
   Respondent also believed that the record relating to the
nature and extent of Mr. Gordon's alleged hedging activities was
unclear. Consequently, respondent argued on brief that we should
resolve the question presented to us under sec. 1256(f)(3)(B)
based on Mr. Gordon's failure to satisfy his burden of proof on
that issue.
                              - 10 -

constituted an ordinary, and not a capital, loss because of his

hedging activities and his apparent belief that he had introduced

sufficient evidence to establish that he held the options that

generated the 1986 net trading loss for the purposes specified in

section 1256(f)(3)(B).

     Ms. Gordon further contends that even if Mr. Gordon had

claimed that he held most of the options that generated the 1986

net trading loss to hedge the risks that were associated with

other property that he owned, Mr. Gordon was not a "dealer in

securities".7   Thus, according to Ms. Gordon, "as a matter of

law" under general income tax rules, any loss with respect to any

such hedged property would not have been an ordinary loss in Mr.

Gordon's hands, and, consequently, regardless of the nature of

his hedging activities, Mr. Gordon could not have fit within the

hedging exception in section 1256(f)(3)(B).   In support of her

position, Ms. Gordon points to the following testimony elicited

by respondent's counsel on respondent's cross-examination of Mr.

Gordon:

          Q   During the tax year 1986, while you were on
     the floor of the American Stock Exchange, * * * were


7
   Although Ms. Gordon does not provide an explanation in her
motion as to what she means by a "dealer in securities", we
assume that she is referring to an individual who holds securi-
ties, other than the type of options that were held by Mr. Gordon
during 1986, that are excluded from the definition of a capital
asset under sec. 1221(1). Our use herein of the phrase "dealer
in securities" shall have the same meaning as we assume Ms.
Gordon intended by the use of that phrase.
                                 - 11 -

     you a dealer in securities?

          A      No.

Ms. Gordon also points to the following testimony elicited by Ms.

Gordon, through her counsel, on Ms. Gordon's direct examination

of Mr. Gordon:

          Q      * * *

          For what purpose were you holding the stock that
     you -- that you had in your account?

          A      Hedge.

The only other question relating to Mr. Gordon's hedging alle-

gations that Ms. Gordon asked Mr. Gordon was the following:

          Q   * * * You indicated that you were not a
     dealer in securities. What did you mean by that?

              *          *   *     *      *    *     *

          A   I would classify a dealer in securities as a
     specialist on the New York Stock Exchange who makes a
     market in the underlying stock of the options I traded.

     Based on the foregoing testimony, we were able to find in

our Opinion that Mr. Gordon was not a specialist on the New York

Stock Exchange who made a market in the stocks underlying the

options that he traded.      However, we were unable to find, based

on Mr. Gordon's conclusory testimony quoted above that he held

certain stock in an unidentified account8 as a hedge and other


8
   The only documentation in the record of any "account" main-
tained by Mr. Gordon during 1986 consisted of the following
statements issued to him by Wagner Stott Clearing Corp. (Wagner
Stott statements): Wagner Stott statements for the periods Mar.
                                                   (continued...)
                             - 12 -

testimony that he gave regarding his use as a hedge of the stock

that he held in the account that he maintained during 1986 at

Wagner Stott Clearing Corp., that he was not a dealer in securi-

ties during 1986, especially since other evidence in the record

established, and we found in our Opinion, that during that year

Mr. Gordon was licensed by the National Association of Security

Dealers to sell securities to the public and that he was regis-

tered with the Securities Exchange Commission as a broker/dealer.

The entire record presented to us left open the distinct possi-

bility in our mind that Mr. Gordon could have qualified as a

dealer in securities during 1986 and that he could have fit

within the hedging exception in section 1256(f)(3)(B).

     It is significant that Ms. Gordon did not attempt to clarify

the record regarding Mr. Gordon's alleged hedging activities.

The two questions quoted above are the only questions relating to

Mr. Gordon's alleged hedging activities that Ms. Gordon, through



8
   (...continued)
27 through May 30, 1986, and Oct. 31 through Nov. 28, 1986. We
found in our Opinion that those Wagner Stott statements for Mar.
27 through May 30, 1986, reflected that Mr. Gordon held the stock
of 11 companies at the end of the periods covered by those
statements. It was not clear to us from the conclusory testimony
of Mr. Gordon quoted above whether the "account" to which Mr.
Gordon was referring in that testimony was the Wagner Stott
Clearing Corp. account that he maintained in his name during
1986, whether Mr. Gordon held any other stock during that year
through Wagner Stott Clearing Corp. other than that reflected in
the Wagner Stott statements that were part of the record, or
whether he had any other accounts during 1986 with other compa-
nies in which he held stock.
                              - 13 -

her counsel, posed to Mr. Gordon at trial.   In our view, those

questions and Mr. Gordon's responses to them did not elucidate

his testimony about the nature and extent of his alleged hedging

activities during 1986.   Ms. Gordon's counsel could have asked

Mr. Gordon, but did not, whether he was engaged in any hedging

activities in addition to the hedging activities about which he

testified.   If Mr. Gordon's response to that question had been in

the affirmative, Ms. Gordon's counsel could have further clari-

fied the record by asking Mr. Gordon to identify all the property

that he claimed he hedged and all the property that he claimed he

used as a hedge and to describe his activities relating to the

property that he claimed he hedged so that we could have made a

determination as to whether that property was property any loss

with respect to which would have been an ordinary loss in Mr.

Gordon's hands.   See sec. 1256(f)(3)(B).

     It is also significant that although Ms. Gordon contends in

her motion that, based on the record presented to us, we could,

and should, have found in our Opinion that Mr. Gordon did not

hold the options that generated the 1986 net trading loss for the

purposes specified in section 1256(f)(3)(B), Ms. Gordon did not

propose that we find any facts relating to Mr. Gordon's alleged

hedging activities or otherwise relating to the requirements of
                              - 14 -

that section.9   Nor did she make any arguments on brief address-

ing the impact of section 1256(f)(3)(B) and Mr. Gordon's alleged

hedging activities on the resolution of the issue presented under

section 6013(e)(2)(B).   Indeed, Ms. Gordon made no mention what-

soever on brief of section 1256(f)(3)(B).10   It was only after

Ms. Gordon reviewed our findings and conclusions with respect to

the section 6013(e)(2)(B) issue with which she was not satisfied

that she decided to advance for the first time in her motion for

reconsideration arguments relating to the effect of section

1256(f)(3)(B) and Mr. Gordon's alleged hedging activities on the

resolution of the issue presented under section 6013(e)(2)(B).

     We find that the arguments that Ms. Gordon is advancing with




9
   In fact, the only mention by Ms. Gordon on brief of Mr.
Gordon's claimed hedging activities is in Ms. Gordon's answering
brief where she objects to the following finding of fact proposed
by respondent: "Mr. Gordon alleges that 80% of his trades were
hedging transactions although he never identified any of his
trades as a hedging transaction." In objecting to that proposed
finding of respondent, Ms. Gordon states: "Petitioner objects to
this proposed finding to the extent it deals with Mr. Gordon's
'allegations' of hedging. Mr. Gordon's hedging activities, if
any, were related to protecting his option positions. Mr. Gordon
did use options to hedge other positions."   We found Ms.
Gordon's statement in that objection about "Mr. Gordon's hedging
activities, if any," to be an acknowledgment by Ms. Gordon that
the record as it relates to Mr. Gordon's hedging activities was
not clear and required further development.
10
   Nor did Ms. Gordon mention sec. 1256(f)(3)(A) on brief. As
we indicated in our Opinion, Ms. Gordon did not even argue on
brief that, on the record presented, that section, and not sec.
1256(a)(3), requires that the 1986 net trading loss be treated as
a loss from the sale or exchange of a capital asset.
                               - 15 -

the benefit of hindsight in her motion for reconsideration11 do

not establish any unusual circumstances or substantial error.12

Accordingly, we shall deny her motion.

      To reflect the foregoing,

                                       An order will be issued

                                  denying the respective motions



11
   We have considered all the arguments advanced by Ms. Gordon
in her motion for reconsideration that are not discussed herein,
and we find them to be without merit.
12
   We note that although we decided the innocent spouse issue
based on Ms. Gordon's failure to satisfy her burden of proving
that the claimed 1988 NOL deduction was a grossly erroneous item
within the meaning of sec. 6013(e)(2)(B), we could have found on
the record presented to us that the claimed 1988 NOL deduction
had a basis in fact and in law within the meaning of that section
and that therefore it is not a grossly erroneous item. That is
because, as stated by the Court of Appeals for the Second Circuit
in Friedman v. Commissioner, 53 F.3d 523, 529-530 (2d Cir. 1995),
affg. in part and revg. in part T.C. Memo. 1993-549:

     The "innocent spouse" defense was designed to prevent the
     inequity of holding one spouse liable for the oversubtle
     financial machinations of the other; the defense was not
     intended to permit one spouse to escape liability for an
     apparently legitimate claim that turns out to be disal-
     lowed. The defense is all the more inappropriate * * *
     [where] both taxpayer[s] * * * were equally in the dark as
     to the future status of their claim when they signed their
     * * * return.

Moreover, the record in these cases establishes that the question
of the treatment of the 1986 net trading loss as either an
ordinary or a capital loss is a technical question of law, see
Haymond v. Commissioner, T.C. Memo. 1997-289, and the fact that
Mr. Gordon sold option contracts in the normal course of his
trade or business as an options market maker "provided an argu-
ably colorable--albeit incorrect--basis" for the treatment of the
1986 net trading loss as an ordinary loss, see Kelly v. Commis-
sioner, T.C. Memo. 1996-529, supplemented by T.C. Memo. 1997-99.
- 16 -

for reconsideration of Mr. Gordon

and Ms. Gordon.
