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was not counting on stock appreciation, but he did not deny that
the value of the stock could rise.
Like the corporation in Miller, Seattle Pump did not pay
dividends in the years in issue. We concluded in Miller that the
taxpayer held the stock as an investment, even though he bought
it so he could become president of the corporation. Similarly,
we believe petitioner held Seattle Pump stock as an investment
despite the fact that he served as its president.
Petitioners rely on Schanhofer v. Commissioner, T.C. Memo.
1986-166, in which we held that the investment interest
limitations under section 163(d) did not apply to interest paid
by a taxpayer who borrowed money to buy stock in the company for
which he worked. That case is distinguishable. In Schanhofer,
the taxpayer paid a substantial premium for stock that was not
marketable because of restrictions in beverage permit and
franchise agreements. The stock in Schanhofer had minimal growth
potential. In contrast, petitioners' sale of the stock of
Seattle Pump was not restricted, petitioners paid fair market
value for the stock, and they did not show that it has no growth
potential.6
6 We did not consider section 163(h) in Miller v.
Commissioner, 70 T.C. 448 (1978) and Schanhofer v. Commissioner,
T.C. Memo. 1986-166, because it had not yet been enacted; we
decided whether the interest at issue was limited by section
163(d).
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