Humes Houston Hart - Page 8

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          in carrying on a trade or business as a securities trader only              
          where both of the following are true:                                       
               (1) The taxpayer's trading activity is substantial.  King v.           
          Commissioner, supra at 458-459; Mayer v. Commissioner, supra.  In           
          this regard, the taxpayer's trading activity must be frequent,              
          regular, and continuous enough to constitute a trade or business;           
          sporadic trading does not constitute a trade or business.                   
          Commissioner v. Groetzinger, 480 U.S. 23, 35 (1987).                        
               (2) The taxpayer seeks to catch the swings in the daily                
          market movements, and to profit from these short-term changes,              
          Moller v. United States, supra at 813; Purvis v. Commissioner,              
          530 F.2d 1332, 1334 (9th Cir. 1976), affg. T.C. Memo. 1974-164;             
          Liang v. Commissioner, 23 T.C. 1040, 1043 (1955), rather than to            
          profit from the long-term holding of investments, Estate of                 
          Yaeger v. Commissioner, supra at 33; Mayer v. Commissioner,                 
          supra.  In connection with this, courts look at whether the                 
          taxpayer's securities income is principally derived from frequent           
          and substantial sale of securities rather than from dividends,              
          interest, or long-term appreciation.  Moller v. United States,              
          supra at 813; King v. Commissioner, supra at 458-459; Liang v.              
          Commissioner, supra at 1043.                                                
               Petitioner does not meet the first prong of this two-part              
          test.  In each year in issue, his trading was not substantial;              
          petitioner was not frequent, regular, or continuous in his                  
          trading, as shown by the above summary.  We conclude that                   

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