Stephen and Jane Marrin - Page 10

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          upon whether these assets come within the meaning of section                
          1221(1).                                                                    
               Securities generally cannot be classified as stock in trade            
          or inventory unless they are held primarily for sale to customers           
          in the ordinary course of business.  Van Suetendael v.                      
          Commissioner, 152 F.2d 654 (2d Cir. 1945); accord Tybus v.                  
          Commissioner, T.C. Memo. 1989-309.  Whether securities are held             
          for sale primarily to customers is a question of fact, Stern                
          Bros. & Co. v. Commissioner, 16 T.C. 295, 313 (1951), and it has            
          been long established by this Court that the phrase "to                     
          customers" is of paramount importance.  King v. Commissioner, 89            
          T.C. 445, 457-458 (1987); Kemon v. Commissioner, 16 T.C. 1026,              
          1032 (1951); Wood v. Commissioner, 16 T.C. 213, 219-220 (1951);             
          Tybus v. Commissioner, supra.  The importance of the phrase "to             
          customers" lies in the fact that Congress amended the predecessor           
          of section 1221(1) in the Revenue Act of 1934 (1934 Act), ch.               
          277, 48 Stat. 680, to add these words (as well as the word                  
          "ordinary"), with securities trading specifically in mind, for              
          the express purpose of denying ordinary loss treatment to                   
          speculators in securities.  The legislative history of the "to              
          customers" amendment in the 1934 Act has been explained at length           
          in prior opinions of this Court.  See King v. Commissioner,                 
          supra; Kemon v. Commissioner, supra; Wood v. Commissioner, supra.           
          By adding the phrase "to customers", Congress intended to make it           





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