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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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