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certain activities are to be excluded from the definition of
"trade or business within the United States," to wit:
Trading in stocks or securities for the taxpayer's own
account, whether by the taxpayer or his employees or
through a resident broker, commission agent, custodian,
or other agent, and whether or not any such employee or
agent has discretionary authority to make decisions in
effecting the transactions. * * *
Trading in stocks or securities, equated in the regulations with
"the effecting of transactions in the United States in stocks or
securities," includes:
buying, selling (whether or not by entering into short
sales), or trading in stocks, securities, or contracts
or options to buy or sell stocks or securities, on
margin or otherwise, for the account and risk of the
taxpayer, and any other activity closely related
thereto (such as obtaining credit for the purpose of
effectuating such buying, selling, or trading). * * *
[Sec. 1.864-2(c)(2)(i), Income Tax Regs.]
The exclusion for trading in stocks or securities for the
taxpayer's own account, however, does not apply to: (1) A dealer
in stock or securities, and (2) a corporation (other than one
described in the parenthetical clause of section
864(b)(2)(A)(ii)) whose principal business is trading in stocks
or securities for its own account and whose principal office is
in the United States. Sec. 864(b)(2)(A)(ii). A dealer in stocks
or securities is defined as "a merchant of stocks or securities,
with an established place of business, regularly engaged as a
merchant in purchasing stocks or securities and selling them to
customers with a view to the gains and profits that may be
derived therefrom." Sec. 1.864-2(c)(2)(iv)(a), Income Tax Regs.
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