A lesson in Brokawnomics, the price of ugliness, wrestling with Treasury, and other matters. CAUGHT BY THE IRS
By DANIEL SELIGMAN REPORTER ASSOCIATE Patty de Llosa

(FORTUNE Magazine) – Everybody and his uncle is now into year-end tax planning, but few uncles have our tax problem. Friends, we have questions to which even the IRS has no answers -- which is, in fact, the problem. To be sure, not a whole lot of money is involved. This is because the Iowa Electronic Markets (IEM), run by the business school at the University of Iowa, does not let a chap invest really big bucks. The IEM, you will recall, is the place where anybody with a computer and modem can invest in numerous propositions, including election outcomes, currency fluctuations, and such special events as presidential elections and whether or not NAFTA would become law. Our own experience thus far incorporates one $200 loss, that amount being blown on units representing a bet that lesser-evil George Bush would win the 1992 election; when he lost, each unit instantly became worth $0.00. Recent experience has been more favorable. This past fall we spent $400 on 648 units representing a belief that NAFTA would pass, and contrary to the gloomy perspective registered in an earlier report (November 1), we now stand to clear a profit of $248. The folks at the Treasury have been unfailingly courteous about it all, but they obviously have trouble coming to grips with the IEM. Although this institution is regulated by the Commodity Futures Trading Commission, the IRS is not yet willing to certify that profits and losses in elections, NAFTA, and whatnot are capital transactions reportable on Schedule D, where we put the Bush loss. One IRS official has since told us he personally thought this fiasco should have been booked as a gambling loss -- not what a fellow wants to hear when he lacks offsetting gambling income. So how should we report the $248 profit? The taxmen won't say -- and also won't promise not to nail us for having reported it wrong after they finally make up their minds. Tough, eh? But who said life was fair, not to mention the IRS?