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After concessions by the parties, this Court must decide
whether petitioner Keith M. Northrop (petitioner) was in the
trade or business of being a stock trader or whether he was an
investor during 1995 and 1996, and whether petitioner in his
investment activity is entitled to deduct: (1) Office expense of
$920 and $1,935 in 1995 and 1996, respectively, (2) depreciation
of $3,854 in 1995, and (3) interest expense of $2,411 and $4,233
in 1995 and 1996, respectively. Respondent determined that
petitioners were liable for self-employment tax for 1995 and
1996, respectively, on the earnings of petitioner from his
counter top resurfacing business and of petitioner Sandra B. Ball
from her real estate business. Respondent allowed petitioners
corresponding deductions of one-half of the self-employment tax.
Because petitioners did not address the self-employment tax issue
at trial, we deem it conceded.
Some of the facts have been stipulated and are so found.
Petitioners resided in Austin, Texas, at the time they filed
their petition.
At the outset, we note that petitioners reported $15,209 and
$12,556 of adjusted gross income in 1995 and 1996, respectively.
Petitioner claimed he had a credit line of $150,000 from various
credit card companies and used only borrowed money to invest in
stock. On his 1996 return, petitioner claimed he purchased
$878,146.26 worth of stock in February 1996. We find it hard to
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