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III. Petitioner’s Status as a Trader in Securities
A. Applicable Principles of Law
In general, for Federal tax purposes, a person who purchases
and sells securities falls into one of three distinct categories:
dealer, trader, or investor. See King v. Commissioner, 89 T.C.
445, 458-459 (1987). Both traders and dealers are engaged in the
trade or business of buying and selling securities. Only the
dealer’s business, however, involves sales to customers in the
ordinary course of that business. Consequently, only the
dealer’s securities fall within the exception to capital asset
status that is provided for “property held by the taxpayer
primarily for sale to customers in the ordinary course of his
trade or business”. Sec. 1221(a)(1). Thus, “traders * * *
occupy an unusual position with respect to the tax laws. Traders
may engage in a trade or business which produces capital gains
and losses rather than ordinary income and losses.” King v.
Commissioner, supra at 457.
In order to qualify as a trader (as opposed to an investor)
petitioner’s purchases and sales of securities during 1999 must
have constituted a trade or business. “In determining whether a
taxpayer who manages his own investments is a trader, and thus
engaged in a trade or business, relevant considerations are the
taxpayer’s investment intent, the nature of the income to be
derived from the activity, and the frequency, extent, and
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