Purvis v. Commissioner

U.S. Tax Court

Purvis v. Commissioner

1974 T.C. Memo. 164, 33 T.C.M. 702, 1974 Tax Ct. Memo LEXIS 156

United States Tax Court·Decided June 24, 1974·No. Docket No. 6341-72.·Unpublished·Cited by 19 cases

Opinion

RALPH E. PURVIS and PATRICIA LEE PURVIS, Petitioners v. COMMISSIONER OF INTERNAL REVENUE, Respondent.

Purvis v. Commissioner

Docket No. 6341-72.

United States Tax Court

T.C. Memo 1974-164; 1974 Tax Ct. Memo LEXIS 156; 33 T.C.M. (CCH) 702; T.C.M. (RIA) 74164;

June 24, 1974, Filed.

Ralph E. Purvis, pro se.

Robert J. Chicoine, for the respondent.

SCOTT

MEMORANDUM FINDINGS OF FACT AND OPINION

SCOTT, Judge: Respondent*157 determined deficiencies in petitioners' income taxes for the calendar years 1967 and 1968 in the amounts of $3,198.89 and $17,723.97, respectively.

Some of the issues raised by the pleadings in this case have been disposed of by agreement of the parties, leaving for our decision the following: Whether petitioner was engaged in the trade or business of a trader in stock during the years 1963 through 1968 so as to be entitled to deduct interest payments to brokerage firms with which he maintained margin accounts as business expenses under section 172(c), I.R.C. 1954, ¹ for the years 1963 through 1966, and expenses in connection with lobbying activities respecting an interest equalization tax on foreign stock during the years 1967 and 1968 under the provisions of section 162(e).

FINDINGS OF FACT

Some of the facts have been stipulated and are found accordingly.

Petitioners, husband and wife who resided in Silverdale, Washington, at the date of the filing of their petition in this case, filed joint Federal income tax returns for each of the years 1967 and 1968 with the district director*158 of internal revenue at Seattle, Washington.

Ralph E. Purvis, hereinafter referred to as petitioner, has been a member of the Bar of the State of Washington since 1934. With the exception of approximately 4 years while serving as a naval officer during World War II, he was engaged in the full-time practice of law from 1936 to 1962. In 1962 petitioner terminated his full-time practice of law but continued to practice law on an occasional basis through 1968.

While still actively engaged in the full-time practice of law, petitioner became interested in acquiring Canadian mining securities as an investment. Commencing in 1956, petitioner purchased a substantial number of shares of Highland Bell, Ltd., a Canadian silver mining company. By December 21, 1960, petitioner had acquired 102,100 of the approximately 1,500,000 outstanding shares of Highland Bell, Ltd., and on that date was elected as a member of the board of directors of that corporation. Petitioner served as a director of Highland Bell, Ltd., until September 1969 and received an annual director's fee of $277.50 for this service.

The stock of Highland Bell, Ltd., was listed on the Vancouver, British Columbia and Toronto, *159Ontario stock exchanges during the period of petitioner's ownership of this stock. By 1963 the shares of Highland Bell, Ltd., which petitioner owned had substantially increased in value over the price petitioner had paid for the shares, enabling petitioner to borrow money from his broker using these shares as collateral.

During 1963 and a portion of 1964 petitioner maintained a margin account, No. 50028, with the securities brokerage firm of James Richardson & Sons, Vancouver, British Columbia.

During a portion of 1964 and during the years 1965, 1966, 1967, and 1968, petitioner maintained a margin account, No. 601 11076, with the Vancouver, British Columbia office of the securities brokerage firm of Merrill Lynch, Pierce, Fenner & Smith, Inc. Only stock in Canadian corporations was purchased and sold by petitioner through this account.

During the months of January through July 1965, petitioner maintained a second account, No. 602 10134 with Merrill Lynch, Pierce, Fenner & Smith, Inc., which was used to purchase and sell stock in a United States corporation, Oxford Paper Company. As of the end of the months January through May 1965, this account showed that petitioner owned*160 2,000 shares of Oxford Paper Company, which shares were sold by petitioner on June 10, 1965. Petitioner continued to maintain this account and in 1967 and 1968 purchased and sold stocks in United States States corporations through this account. This account showed that the brokerage firm held no stock in this account for petitioner in the first 2 months of 1967, but at the end of March and April 1967, 500 shares of Avnet, Inc., were held in this account for petitioner. The following schedule shows the stocks held in account No. 602 10134 for petitioner at the end of each month from May 1967 through December 1968:

1967
End of month	Name of stock	No. of shares
May	Mack Truck Inc. PV5	100
	Murphy Oil Corp	1,000
	Stanrock Uran Mines	15,000
June	APL Corp	500
	Amphenol Corp	400
	Murphy Oil Corp.	600
	Stanrock Uran Mines	15,000
July	Pacific Petroleums

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