Allie Ray McCullen and Shurley G. McCullen - Page 20

                                       - 20 -                                         
          reasonable relationship to the benefit petitioner got from owning           
          stock in New-East Bank.                                                     
               Petitioners contend that petitioner's purchase of the stock            
          was not the purchase of a capital asset because he had no                   
          investment motive when he bought the stock.  We disagree.  Stock            
          is generally a capital asset.  Arkansas Best Corp. v.                       
          Commissioner, 485 U.S. 212, 216-217, 219, 222-223 (1988).  Buying           
          stock is not ordinarily an activity of a trade or business.                 
          Higgins v. Commissioner, 312 U.S. at 216 (managing securities               
          investments and collecting income therefrom generally is not a              
          trade or business, regardless of the amount invested, continuity            
          of effort, or amount of time devoted to the activity).                      
               Petitioners rely on Schanhofer v. Commissioner, T.C. Memo.             
          1986-166, where we held that the investment interest limitations            
          of section 163(d) did not apply to interest paid by a taxpayer              
          who borrowed money to buy stock in the company for which he                 
          worked.  That case is distinguishable.  In Schanhofer, the                  
          taxpayer paid a substantial premium for stock that was not                  
          marketable.  The stock in Schanhofer had minimal growth                     
          potential.  In contrast, petitioner bought unrestricted New-East            
          Bank stock and did not show that he paid more than fair market              
          value for the stock or that it had no growth potential.3  This              

               3 We did not consider sec. 163(h) in Miller v. Commissioner,           
          70 T.C. 448 (1978), and Schanhofer v. Commissioner, T.C. Memo.              
          1986-166, because it had not yet been enacted.  We decided                  
                                                             (continued...)           




Page:  Previous  5  6  7  8  9  10  11  12  13  14  15  16  17  18  19  20  21  22  23  24  Next

Last modified: May 25, 2011