Hi,

I had taken 90% non recourse loan from Derivium Capital against my
stock holdings (and pledged the stock).  At loan maturity, I have the
option (not obligation) to repay the loan and get the stock back.

California FTB has audited me and asked me to treat the loan as stock
sale.  Are there any tax laws/regulations that would allow me to treat
the loan as loan and not as stock sale?

Any ideas on who would be cheaper than lawyers who can help me with
the audit process?  The lawyers I got in touch with are not economical
(since my tax liabilities are less that $10K).

Thanks!

Other resources for you:

a detailed memo justifying the stock loans as loans not sales and a
possibly relevant IRS Revenue Ruling:
http://www.rochlis.com/personal/derivium/  (not first security
corporation - FSC - was derivium's old name).

2 Yahoo Groups  - http://groups.yahoo.com/ - search for "Derivium".
Pretty inactive.

http://www.deriviumclients.org/

Many derivium clients has talked about coordinating efforts.