Nathan Boatner - Page 10

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                  For the purposes of section 1221, dealers must have                                   
            customers.  United States v. Diamond, 788 F.2d 1025, 1029 (4th                              
            Cir. 1986).  Petitioner argues that Lind-Waldock, Kemper, and                               
            Dean Witter were his customers.  Petitioner, however, offers no                             
            proof for this contention.  We find that Lind-Waldock, Kemper,                              
            and Dean Witter were not petitioner's customers and that in fact                            
            petitioner had no customers.  We hold, therefore, that petitioner                           
            was not a dealer.  Thus, the stocks and commodities petitioner                              
            purchased and sold were capital assets in his hands, and the net                            
            losses from securities transactions were capital losses.                                    
                  Having determined that petitioner was not a dealer, we must                           
            now turn to the question of whether petitioner was engaged in the                           
            trade or business of buying or selling stocks.  If so, petitioner                           
            was a "trader" as opposed to an "investor".  Unlike an investor,                            
            a trader's expenses are deducted in determining adjusted gross                              
            income rather than as itemized expenses.  To determine whether a                            
            taxpayer who manages his own investments is a trader, we                                    
            consider, inter alia, the frequency, extent, and regularity of                              
            the taxpayer's securities transactions.  Moller v. United States,                           
            721 F.2d 810, 813 (Fed. Cir. 1983); Mayer v. Commissioner, T.C.                             
            Memo. 1994-209.  A taxpayer is a trader engaged in carrying on a                            
            trade or business of selling securities only if both of the                                 
            following are true:  (1) The taxpayer's trading activity is                                 
            substantial, and (2) the taxpayer seeks to catch the swings in                              





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