Joel, My GUESS (not a confirmation - you gotta pay that Tax Lawyer $500/hr for that (g)) is that Broad Based INDEX options are 1256 futures contracts and therefore they are NOT subject to wash-sale rules. ALSO it seems that Broad Based INDEX options that are 1256 futures contracts ARE subject to the mark-to-market 40/60 rule.
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>> Certainly when mark to market is applied, all gains
>>become ordinary income,
Not quite. Don't overlook the Sec 1256 40/60 rule I mentioned in my previous post today..
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>>I should also point out, there are issues as to when mark to market >>becomes effective....i.e. the date of the law, which was mid year or >>to stocks acquired anytime in the tax year....
I DIDN'T pick up on any limitation, but I'm no expert in this area.
A THOUGHT: I would presume from my quick read today that ALL stocks held as part of your TRADE OR BUSINESS would qualify...
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NOTE that if should be somewhat obvious that BY DEFINITION, ALL stocks held in a TRADER'S Trade or Business are by their very nature EXTREMELY SHORT-TERM, and therefore -- is there much likely-hood that anything held on December 31, 1997 in fact existed in a prior year - or even before enactment???
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There was ALSO something in the Code about recognizing the effects of going to mark-to-market over FOUR TAX YEARS. I didn't quite "get it" after reading that part a few times over. But it SEEMED that your LOSS for 1997 (or your GAIN) would be recognized 1/4 each in 1997, 1998, 1999, and 2000.
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>>secondarily, where a taxpayer may not qualify in the next
>>or future years as a trader, how will they treat stocks
>>marked to market, particularly in a loss situation etc
I am pretty confident the tax basis, once adjusted will remain so. In other words if one was a TRADER on December 31, 1997 and he marked-to-market and then effective January 1998 he CHANGED to an INVESTOR, that his carryover basis would be the SAME as that as adjusted by the Mark-to-Market at 12/31/97.
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>>gets complicated when mixing a loss as ordinary income
>>and then a carry over or carry back against capital
>>gain income.... what a mess.
True, it could be complicated, but it is CLEAR and it just takes TIME to make the computations, and make any gray-area decisions.
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>>or stocks designated as exceptions using the one day grace
>>rule....meaning designated on the "day of trade" vis a vis some
>>confirming vehicle establishing the designation. almost like "sale
>>against purchase trade" though i don't think there is a similar order
>>one could give a broker in this case.
What is this "day-of-trade" rule you are talking about?
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Colin |
