Nelson v. Comr., T.C. Memo. 2013-259

(petitioner, sole shareholder of mortgage broker business, deemed not to be in trade or business of trading securities; over $800,000 of claimed expenses disallowed and accuracy-related penalties imposed; court noted that I.R.C. Sec. 162(a) does not provide definition of "trade or business" but noted that relevant considerations include taxpayer's intent, nature of income derived from activity, frequency, extent and regularity of activity; court noted that trading activities must be substantial in terms of number of trades executed, amount of money involved and number of days on which trades executed; petitioner received substantial wage income and executed trades on investment account for which petitioner had no clients; in 2005, 535 trades executed on account on 121 days (out of available 250) with 95 trades occurring in one week; eight periods of at least seven days in which no trades occurred; in 2006, 235 trades executed on 66 days (out of 250 available days); holding period ranged from between one to 101 days; seven periods of at least seven days where no trades occurred; number of trades insufficient to constitute "substantial" amount for either 2005 or 2006 and even though amount of money involved "considerable" ($24 million to $33 million), amount not determinative of whether activity substantial; total number of trading days not substantial).

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