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revg. and remanding 35 B.T.A. 804 (1937). There, the taxpayer
claimed that he could deduct as compensation brokerage
commissions paid to acquire securities in the ordinary course of
his business. The Commissioner had disallowed the deduction,
determining that the payments were capital expenditures. The
taxpayer argued that it could deduct the payments because, he
asserted, they were an ordinary and necessary business expense.
The taxpayer asserted that he was in the business of buying and
selling securities. A divided Board of Tax Appeals sustained the
Commissioner’s disallowance. See Winmill v. Commissioner, 35
B.T.A. 804 (1937). The Court of Appeals for the Second Circuit
disagreed with the Board, holding that the payments were
deductible if the taxpayer was in fact engaged in the business of
buying and selling securities. See Winmill v. Commissioner, 93
F.2d 494 (2d Cir. 1937). The Supreme Court held that the
payments were capital expenditures. The Supreme Court noted that
the Treasury regulations (Regs. 77, art. 282 (1932)19) set forth
a longstanding position that commissions paid in acquiring
securities are considered part of the securities’ cost and
stated: “The fact-–if it be a fact-–that * * * [the taxpayer]
was engaged in the business of buying and selling securities does
19 The substance of these regulations regarding commissions
paid to acquire securities has been carried forward into sec.
1.263(a)-2(e), Income Tax Regs.
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