- 108 -
loss upon the disposition of their stock or upon its becoming
worthless even though they were not securities dealers. See,
e.g., Irwin v. United States, 558 F.2d 249, 252 (5th Cir. 1977)
(holding that for a taxpayer to be entitled to an ordinary
deduction upon his stock’s becoming worthless, the taxpayer was
required to show (1) the purchase of that stock was necessary for
the taxpayer’s business, and (2) his motive for the purchase was
to promote his business purpose and investment was not a
predominant motive); W.W. Windle Co. v. Commissioner, 65 T.C.
694, 713 (1976) (holding that where a substantial investment
motive exists in a predominantly business-motivated acquisition
of corporate stock, the stock is a capital asset). Petitioner
asserts that it made the advances in controversy to protect or
promote its own business.
The cases petitioner relies on, however, predate the Supreme
Court’s holding in Ark. Best Corp. v. Commissioner, 485 U.S. 212
(1988). These pre-Ark. Best Corp. cases were decided under a
doctrine that had evolved from the case of Corn Prods. Refining
Co. v. United States, 350 U.S. 46 (1955), in which the Supreme
Court recognized a nonstatutory exception to the definition of
capital asset. In that case the exception concerned whether
certain futures contracts that were acquired and held for a
business purpose qualified for ordinary loss as a noncapital
asset.
Page: Previous 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 NextLast modified: May 25, 2011