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law practice. On September 19, 1990, respondent requested a
completed Schedule C from petitioner. Petitioner sent respondent
the requested Schedule C. No audit occurred with respect to
petitioner for the 1989 tax year.
Petitioner engaged in securities transactions, in his own
name, from 1987 until approximately 1991. In May of 1991,
petitioner incorporated James Trading as an S corporation.
Petitioner was the sole officer and shareholder of James Trading
throughout its existence. After May of 1991, petitioner, on
behalf of James Trading, engaged in securities transactions with
Lind-Waldock & Co. (Lind-Waldock), Kemper Securities (Kemper),
and Dean Witter Reynolds, Inc. (Dean Witter). Petitioner was not
a member of any exchange or market dealing in securities or
commodities, nor was petitioner a licensed broker of securities
or commodities in 1992. Petitioner executed approximately 75
securities transactions during 1992.3
James Trading reported net losses from securities
transactions of $12,686.54 and $47,129.24 for 1991 and 1992,
respectively, on Form 1120S. Petitioner advanced $12,686.54 and
$47,129.24 (the advances) in 1991 and 1992, respectively, to
James Trading to cover these losses. James Trading gave no
collateral for the advances. Petitioner drafted loan agreements
3 Petitioner's trading refers to the securities and/or
commodities trades made on behalf of James Trading.
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