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asset under section 1221, that the character of gains or losses
from a taxpayer’s buying and selling securities on his own
account is capital and not ordinary, even though the taxpayer may
be engaged in a trade or business with regard to such trading
activity. See, e.g., Marrin v. Commissioner, 147 F.3d 147, 151
(2d Cir. 1998), affg. T.C. Memo. 1997-24; King v. Commissioner,
supra at 458. Thus, the losses that petitioner sustained as a
securities trader buying and selling stocks are capital losses,
not ordinary losses. He may not offset his ordinary income in a
taxable year, except to the extent of $3,000, with the capital
losses sustained in that year. Secs. 172(d)(2), 1211(b).
Because the amounts claimed as NOL carryovers were capital
losses, respondent correctly disallowed the NOL carryover
deductions as offsets to petitioner’s ordinary income in 2001 and
2002.
Petitioner may offset any capital gains he had in the years
in issue with his capital losses, and he may take an additional
capital loss deduction of up to $3,000 per year for the excess
losses that cannot be offset by capital gains. Sec. 1211(b).
His nondeductible capital losses may be carried over to be
deducted from capital gains in subsequent years. Sec. 1212(b).
Because the losses sustained by petitioner in relation to his
trading activity are capital and not ordinary in character, such
excess capital losses carried over are deductible only in
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Last modified: May 25, 2011