Question

Which which is Valon professionals is not considered engaged in the Pacific service trade or business

Answer 1

This observation holds true even more clearly when one considers whether the activity of investing in distressed debt is a business. The argument has been made that if the buyer of distressed debt is in the "business" of pounding the table at creditor's committee meetings to maximize his return, this somehow converts vulture investing (bottom fishing) into a business. But this argument has no support whatsoever in law, and the people who make it cite no such support. Even more ridiculous is the claim that a person who invests in multiple businesses in order to improve their profitability and sell them at a gain is in some kind of "business." While the courts may have strained to find individual stock traders in a business in order to give them ordinary losses, no court has ever held that a mere promoter is engaged in a business or can claim ordinary losses upon failure.

So what about those stock traders? I said earlier that there is no such thing as a trader, in the sense that this is not some third prong of ETB. The courts invented trader status to give individual taxpayers ordinary losses in a world where capital losses of individuals are extremely limited. And Congress reacted to those cases by making clear, in §864(b), that whatever some sentimental judge might think to do to bend the law for an individual trader, trading is certainly not a business in the ETB sense. The presence of a safe harbor does not imply its opposite. The notion that if a foreign person engages in some activity that is not "trading," then it must be a business, is illogical and false.

I agreed with his observation that this published guidance did not directly address the issue of defining the circumstances of when a rental activity would be defined either as a trade or business or as an activity engaged in to produce income. We both observed that the preamble to the proposed QBI regulations is not literally correct when it states that the term “trade or business” is “defined” by several other sections of the tax code. Several sections of the tax code contain the words “trade or business,” but do not define that term. What the new QBI proposed regulations probably meant was that the term as used in those sections of the tax code was defined by the case law and other guidance on this subject.