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repayment (as well as the absence of any form of security) tends
to refute the existence of a valid debtor-creditor relationship.
Petitioner's testimony regarding the notes was not consistent
with the weight of the objective evidence in this case. Based on
the record as a whole, we conclude that there was no expectation
of repayment, and that the advances do not constitute bona fide
loans.4
Securities Transactions
Respondent also determined that petitioner was not a
"dealer" regarding securities transactions because he had no
customers, and therefore the net losses James Trading realized in
1992 were subject to the capital loss limitations of sections
165(f) and 1211(b). Petitioner claims that he was engaged in a
trade or business because he had a reasonable expectation of
earning a profit. Petitioner further contends that he was either
a "dealer" or "trader" regarding securities transactions in 1992
and thus seeks ordinary loss treatment for the net losses
incurred during 1992.
Section 165(a) generally provides a deduction for any loss
sustained during the taxable year and not compensated by
insurance or otherwise. Section 165(f), however, provides that
losses from the sale of capital assets shall be allowed only to
4 Consequently, we need not decide whether any debt would
have been a business or nonbusiness debt.
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