Lee B. Arberg and Melissa A. Quinn - Page 13




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          transfer commission rebate.  Hence, with a few concessions,                 
          petitioners’ revised position essentially restructured the                  
          reporting of their claimed business losses.  The position did               
          not, however, alter the substance of their stance that activity             
          in the E Trade account should generate ordinary income and losses           
          because Mr. Arberg qualified as a trader in securities and that             
          various business expenses incurred by him were deductible under             
          section 162.                                                                
               The examination culminated in the issuance of a notice of              
          deficiency to petitioners’ for 2000 on May 18, 2005.  The notice            
          was based on the reporting in the original return.  Respondent              
          therein disallowed all income and expenses claimed on the                   
          Schedule C but permitted a portion of the disallowed expenses as            
          miscellaneous unreimbursed employee expenses (principally of Mr.            
          Arberg) or investment expenses (of Ms. Quinn) on Schedule A.  The           
          attached explanation of adjustments noted, inter alia, that                 
          “Melissa A. Quinn had not elected to use the Mark to Market                 
          Accounting Method for her trades in securities or commodities”              
          and that petitioners had not established that the claimed                   
          expenses were incurred and/or paid for ordinary and necessary               
          business purposes.  The instant petition and litigation followed.           












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