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Petitioner filed a Schedule C, Profit or Loss from Business,
for Chameleon Counters in 1995 and 1996. On the Schedules C, he
listed office expenses, interest, and depreciation which he
asserted were related to his business as a stock trader.
Petitioner listed his gains and losses from the stock trades on
Schedule D, Capital Gains and Losses. Respondent disallowed the
expenses because it was determined that petitioner is not in the
trade or business of being a stock trader, but is instead an
investor, and because petitioners did not substantiate the
expenses. Petitioner claims he is a trader, not an investor, and
should be entitled to deduct the above expenses on Schedule C.
We briefly comment on the question which was the focus of
the parties at trial; whether petitioner was a trader or
investor. In determining whether a taxpayer who manages his own
investments is a trader or merely an investor, we consider the
following factors: "(1) The taxpayer's investment intent; (2) the
nature of the income to be derived from the activity; and (3) the
frequency, extent, and regularity of the taxpayer's securities
transactions." Hart v. Commissioner, T.C. Memo. 1997-11. To be
a trader, the trading activity must be substantial, which means
"frequent, regular, and continuous enough to constitute a trade
or business" as opposed to sporadic trading.
It is apparent that petitioner's trading activity, eight
sales transactions in 1995 and seven sales transactions in 1996,
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