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plus up to $3,000 for individuals each year. Secs. 172(d)(2),
1211(b); see Fortner v. Commissioner, T.C. Memo. 1993-195.
Because capital gains and losses are those sustained in the
disposition of capital assets, we consider whether the securities
held by petitioner in relation to his trading activity were
capital assets. Section 1221 defines the term “capital asset” as
follows:
SEC. 1221(a). In General.--For purposes of this
subtitle, the term “capital asset” means property held
by the taxpayer (whether or not connected with his
trade or business), but does not include–-
(1) stock in trade of the taxpayer or other
property of a kind which would properly be
included in the inventory of the taxpayer if on
hand at the close of the taxable year, or property
held by the taxpayer primarily for sale to
customers in the ordinary course of his trade or
business;
Because they deal in securities held primarily for sale to
customers in the ordinary course of their trade or business,
dealers in securities need not treat securities as capital
assets. King v. Commissioner, 89 T.C. 445, 458 (1987). However,
because traders buy and sell securities on their own accounts and
have no customers, securities held by traders are capital assets
for Federal income tax purposes. Id.
Petitioner and respondent have stipulated that petitioner
was a trader and not a dealer with regard to his securities
trading activity during the years in issue. The courts have
consistently held, in keeping with the definition of capital
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