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Conversely, respondent advances as a primary position that
ownership of and trades in the E Trade account must be attributed
to Ms. Quinn. Respondent has noted in this connection both the
duty of consistency and the Danielson rule, as well as the
insufficiency of any theory premised on a power of attorney. As
an alternative position, respondent maintains that even if the
account and trades are attributed to Mr. Arberg, he fails to
qualify as a trader in securities for purposes of section 475.
B. General Rules Re: Federal Tax Treatment of Securities
Transactions and Trading
For Federal tax purposes, transactions in securities are
conducted in one of three capacities; i.e., as a dealer, a
trader, or an investor, and the tax treatment of a given
transaction turns upon which of these characterizations applies.
E.g., King v. Commissioner, 89 T.C. 445, 457-459 (1987); Chen v.
Commissioner, T.C. Memo. 2004-132; Boatner v. Commissioner, T.C.
Memo. 1997-379, affd. without published opinion 164 F.3d 629 (9th
Cir. 1998). Dealers are those who are engaged in the business of
buying and selling securities and whose business involves sales
to customers. E.g., King v. Commissioner, supra at 457; Chen v.
Commissioner, supra; Boatner v. Commissioner, supra. Securities
in the hands of dealers are therefore excluded from the
definition of a capital asset, falling within the exception for
“property held by the taxpayer primarily for sale to customers in
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