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as not derived in the ordinary course of a trade or business,
i.e., it will be treated as portfolio income. In regard to this
section, the report of the Senate Committee on Finance stated:
“Although setting aside such amounts may be necessary to the
trade or business, earning portfolio income with respect to such
amounts is investment-related and not a part of the trade or
business itself.” S. Rept. 99-313 (1986), 1986-3 C.B. (Vol. 3)
713, 729-730. We believe that petitioner’s gain is no more
closely connected to his underwriting activities than would be
interest earned on the investment of working capital, and, thus,
it should be treated as not derived in the ordinary course of a
trade or business.
We conclude that petitioner’s gain is portfolio income and
that he cannot utilize his passive losses to offset this gain.
Decision will be entered
under Rule 155.
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