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is an employee of the mortuary business. As a result, he is not
entitled to deduct the interest on the debt incurred to purchase
the Russon Brothers stock as trade or business interest.
The result that we reach is in accord with Rev. Rul. 93-68,
1993-2 C.B. 72, which considers a case virtually identical with
this case. The revenue ruling explained its reasoning as
follows:
Because stock generally produces dividend income,
it is property held for investment within the meaning
of sections 163(d)(5)(A) and 469(e)(1)(A) of the Code,
unless the dividends are derived in the ordinary course
of a trade or business. In this case, any dividends
paid by X [a C corporation] would not be derived by A
[an employee and purchaser of stock in X] in the course
of a trade or business because A is neither a dealer
nor a trader in stock or securities. Thus, the X stock
purchased by A is property held for investment pursuant
to section 163(d)(5)(A), regardless of A's motives for
purchasing or holding that stock. * * * [Emphasis
added.]
Rev. Rul. 93-68, 1993-2 C.B. at 73. Although we are by no means
bound by the revenue ruling, we think its reasoning is correct,
and we have independently reached the same result here.
Section 163(d)(5)(A) contains two objective tests for
"property held for investment." We have concluded that
petitioner's stock in Russon Brothers satisfies the first test
under section 163(d)(5)(A)(i). It is therefore unnecessary to
consider the second test in subparagraph (A)(ii), although it
would seem, and the Government concedes, that the second test
does not apply here.
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