Esmark, Inc. is the parent of a group of corporations that files a consolidated income tax return. Esmark and its subsidiaries use a calendar tax year. One of its subsidiaries is Armour, Inc. Armour has a long history of making various meat products, including bacon. Because of the fluctuation in price and quantity in the pork belly market (the main ingredient in bacon), Armour frequently enters into futures contracts on the Chicago Board of Trade.

1. David Skipper is CEO of Esmark. He also purchases contracts for pork bellies on the Chicago Board of Trade for his own account. On 10/15/20 he purchases a contract for $10,000. The contract has a value of $15,000 on 12/31/20. On 2/23/21 he closes out his position when the contract has a value of $14,000. What are the federal income tax consequences of these transactions?