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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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