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under certain circumstances, an investor’s expenses may be
deductible pursuant to section 212 if incurred in the production
of income. Sec. 212; Whipple v. Commissioner, supra at 200;
United States v. Gilmore, 372 U.S. 39, 45 (1963). Petitioner has
not argued this point in the alternative.
To determine whether a taxpayer who manages his own
investments is a trader, we consider the following nonexclusive
factors: (1) The taxpayer’s intent; (2) the nature of the income
to be derived from the activity; and (3) the frequency, extent,
and regularity of the taxpayer’s securities transactions. Moller
v. United States, 721 F.2d 810, 813 (Fed. Cir. 1983). Therefore,
as stated in Mayer v. Commissioner, T.C. Memo. 1994-209:
A taxpayer’s activities constitute the trade or business of
trading only where both of the following are true:
(1) The taxpayer’s trading is substantial. King
v. Commissioner, 89 T.C. 445, 458-459 (1987); Paoli v.
Commissioner, supra; Walker v. Commissioner, T.C. Memo.
1990-609. In this regard, sporadic trading will not
constitute a trade or business. Commissioner v.
Groetzinger, supra at 35; Paoli v. Commissioner, supra.
(2) The taxpayer seeks to catch the swings in the daily
market movements, and to profit from these short-term
changes, Moller v. United States, supra at 813; Purvis v.
Commissioner, 530 F.2d 1332, 1334 (9th Cir. 1976), affg.
T.C. Memo. 1974-164; Liang v. Commissioner, 23 T.C. 1040,
1043 (1955); Walker v. Commissioner, supra, rather than to
profit from the long-term holding of investments, Estate of
Yaeger v. Commissioner, supra at 33; Paoli v. Commissioner,
supra. In connection with this, courts look at whether the
taxpayer’s securities income is principally derived from the
frequent sale of securities rather than from dividends,
interest, or long-term appreciation. Moller v. United
States, supra at 813; Purvis v. Commissioner, supra at 1334;
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