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T.C. 1026, 1032-1034 (1951). Petitioner concedes on brief and on
stipulation that he did not hold his stock as inventory; he did
not sell to customers; and he did not hold any licenses or
certifications within the securities industry. We hold that
petitioner was not a dealer. Therefore, the stocks petitioner
purchased and sold were capital assets in his hands, and the net
losses were capital losses.
Consequently, if petitioner was engaged in the trade or
business of buying and selling stocks, it was as a "trader"
rather than as a "dealer". Unlike an investor, a trader's
expenses are deducted in determining adjusted gross income rather
than as itemized expenses.3 Moreover, interest paid on loans
used to purchase or carry the trader's positions is not subject
to the investment interest limitations of section 163(d). See
King, supra; Paoli v. Commissioner, T.C. Memo. 1988-23.
In determining whether a taxpayer who manages his own
investments is a trader, we consider the following nonexclusive
factors: (1) The taxpayer's investment intent; (2) the nature of
the income to be derived from the activity; and (3) the
frequency, extent, and regularity of the taxpayer's securities
transactions. Moller v. United States, supra at 813; Mayer v.
Commissioner, T.C. Memo. 1994-209. Thus, a taxpayer is engaged
3 In contrast to trade or business expenses, a taxpayer's
investment-related expenses that are deductible under sec. 212
are subject to a limitation under sec. 67(a) and do not reduce
alternative minimum taxable income.
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