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OPINION
We must decide whether petitioner's gains and losses from
his dealings in Treasury securities were ordinary or capital.
Whereas an individual may generally deduct from current income
all ordinary losses, sec. 165(a), an individual's deduction for
capital losses is limited, secs. 165(f), 1211. See Moravec v.
Commissioner, 500 F.2d 1298 (7th Cir. 1974), affg. per curiam
T.C. Memo. 1973-83. An individual may currently deduct capital
losses only up to the amount of his or her capital gains plus
$3,000 (or $1,500 for married individuals filing separately).
He or she must carry forward any excess loss to a future taxable
year. Secs. 1211(b) and 1212(b); see Moravec v. Commissioner,
supra.
A capital loss is any loss realized on the sale or exchange
of a capital asset. See sec. 1222; Arkansas Best Corp. v.
Commissioner, 485 U.S. 212, 223 (1988). A "capital asset"
includes any "property held by the taxpayer (whether or not
connected with his trade or business)" that is not within one of
five categories. Sec. 1221; Arkansas Best Corp. v. Commissioner,
supra at 215. Section 1221(1), the only category that could
apply here, provides that property is not a capital asset if it
is:
stock in trade of the taxpayer or other property of a
kind which would properly be included in the inventory
of the taxpayer if on hand at the close of the taxable
year, or property held by the taxpayer primarily for
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