What Is a Securities Trader?
Although the Supreme Court has yet to find a taxpayer properly characterized as a securities trader, it is clear that such a businessman exists, given the proper facts. (Levin v. United States, 79-1 U.S.T.C. 9331) The standard applied by the lower courts to distinguish between an investor and a trader was first enunciated by the Tax Court in Liang v. Commissioner (23 T.C. 1040): In the former, securities are purchased to be held for capital appreciation and income, usually without regard to short-term developments that would influence the price of securities on the daily market. In a trading account, securities are bought and sold with reasonable frequency in an endeavor to catch the swings in the daily market movements and profit thereby on a short-term basis. There is general agreement amongst the courts (Moeller v. United States, 83-2 U.S.T.C. 9698 and Purvis v. Commissioner, 76-1 U.S.T.C. 9270) that the following factors are to be considered in determining whether a taxpayer is an
