Shahrooz S. and Shida S. Jamie - Page 7

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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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