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Held: The gain from the sale of stock is
portfolio income pursuant to sec. 469(e)(1)(A), I.R.C.,
and sec. 1.469-2T(c)(3), Temporary Income Tax Regs., 53
Fed. Reg. 5686, 5713 (Feb. 25, 1988), and cannot be
offset by P’s passive losses.
Martha A. Roof, for petitioner.
Louis B. Jack, for respondent.
OPINION
VASQUEZ, Judge: In the notice of deficiency, respondent
determined deficiencies of $38,145 and $79,812 in petitioner’s
Federal income taxes for 1992 and 1993, respectively. After
concessions, the issue for decision is whether gain from the sale
of stock pledged as collateral for a letter of credit which
guaranteed petitioner’s underwriting activities is portfolio
income.
Unless otherwise indicated, all section references are to
the Internal Revenue Code in effect for the years in issue, and
all Rule references are to the Tax Court Rules of Practice and
Procedure.
Background
The parties submitted this case fully stipulated. The
stipulation of facts and the attached exhibits are incorporated
herein by this reference. At the time the petition was filed,
petitioner resided in Pasadena, California.
General Background on Underwriting for Lloyd’s
Lloyd’s of London’s (Lloyd’s) business consists of insuring
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