Income Taxes and Record Keeping ( tax ) Message Board

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Strategies & Market Trends : Income Taxes and Record Keeping ( tax )

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To: henry jakala who wrote (313)	12/25/1997 12:11:00 PM
From: Colin Cody	of 5810

Henry, You are correct that you owe NO SS or Medicare tax on your profits from buying and selling stocks -- As an INVESTOR or even as a TRADER. . Your friends are totally misinformed. After 3 years have passed, it is likely that they will forfeit the ability to claim a refund for their past errors. Additionally, IMO, if uncovered later on, the SS Dept SHOULD deny all benefits attributed to the falsification of their EARNED INCOME in prior years. . There seems to be some discussion that certain TRADERS might owe SS Tax, and I've asked for a citation or reference on this, as I was not aware of any possibility to do this with STOCKS. . While I will be happy to retract my statements below if and when provided a verifiable citation for this, it is my GUESS that people claiming this are confusing COMMODITIES with STOCKS/SECURITIES. These are two totally different animals and are treated Unalike for tax purposes. . Take a look at Sec 1256 which REQUIRES Mark-to-Market for FUTURES CONTRACTS. Now the LANGUAGE can sometimes be confusing here. Futures are bought and sold by COMMODITIOS TRADERS, by FLOO TRADERS and by FUTURES TRADERS, for example. This is NOT to be confused with the terms INVESTOR, TRADER, DEALER as we use here on this BB when referring to buyers and sellers of STOCKS and BONDS or SECURITIES. . OR some old-timers may be thinking of a proposal of IR Regulation 1.446-4 that PLANNED to allow Dealers or Traders to ELECT to Mark-to-Market as an OPTIONAL METHOD of tax reporting. This is NOT appropriate for two reasons. #1 this Market-to-Market ELECTION pertained to DFIs and NOT to Securities such as STOCKS. DFI= Derivative Financial Instruments i.e. what Orange County CA got in trouble with a couple years ago. . and #2 because the PROPOSAL was withdrawn, due to the enactment of IRC Sec 475 in the Regan years. . Colin

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