- 24 -
1029 (4th Cir. 1986); Van Suetendael v. Commissioner, 152 F.2d
654, 654 (2d Cir. 1945), affg. per curiam a Memorandum Opinion of
this Court dated Sept. 25, 1944; King v. Commissioner, 89 T.C.
445, 458 (1987); see Wood v. Commissioner, 16 T.C. 213, 225-226
(1951) ("It is well settled that property cannot be classified as
stock in trade or property subject to inventory unless it is held
by the taxpayer primarily for sale to customers in the ordinary
course of his trade or business."); see also Kelly v.
Commissioner, T.C. Memo. 1996-529; Tybus v. Commissioner,
T.C. Memo. 1989-309. The mere fact that petitioner may have sold
the Treasury securities in the ordinary course of his trade or
business, an assertion that petitioner vigorously makes but which
we decline to decide, does not mean, as petitioner asks us to
hold, that the securities are outside the meaning of the term
"capital asset" as used in section 1221. In order to escape the
broad reach of that term, and the resulting classification as a
capital gain or capital loss, petitioner's sales not only must
have been "in the ordinary course of his trade or business", but
must have been "to customers" as well.12 In fact, the phrase "to
customers" was expressly added to the predecessor of section
12 Petitioner, citing Corn Prods. Ref. Co. v. Commissioner,
350 U.S. 46 (1955), argues on brief that the term "capital asset"
is narrowly defined for purposes of sec. 1221. We disagree. In
Arkansas Best Corp. v. Commissioner, 485 U.S. 212, 222 (1988),
the Supreme Court clarified that the term "capital asset" is
construed broadly, and that "Corn Products * * * [stands] for the
narrow proposition that hedging transactions that are an integral
part of a business' inventory-purchase system fall within the
inventory exclusion of � 1221."
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