kaz, I'm still confused about the advantages of declaring trader status Actually, it is a matter of FACTS and circumstances. It is not an "election", but rather a reflection of what you are doing. But granted, if you failed to declare yourself "a trader", it is unlikely that the IRS would come along and force it upon you. So in that sense it is "an election" that you come forth and declare yourself what you truly are!
(and just how does one do that?). You simply file your 1040 as being in the trade or business of a Securities Trader.
Traders and non-traders are subject to the same $3000/year loss limitation, so that's no reason to switch.
Yup, no difference there at all.
What about Mark to Market? Can either file thusly?
Nope! ONLY a Securities Trader (not an Investor in Securities) may file "mark to market."
And, from trying to parse the IRS' bubblebabble, I think Mark to Market requires the individual to pay Self Employment taxes. Is this correct?
Where'd you get that idea? Get yourself a new tax advisor immediately! (g)
So, just what is the advantage to declaring trader status apart from impressing the neighbors?
It is UNwise to try to impress the neighbors. One should keep his mouth SHUT around friends, family and neighbors about any sophisticated tax situations!!! (g)
Well there's no particular advantage to being an Investor rather than a Trader. True, a Trader incurs more CPA fees and is more subject to audit though.
Advantages? Expenses are fully deductible "above the line" for Traders, whereas Investor's expenses (and especially margin interest expense) are only deductible after limitations eliminate much of those deductions, "BELOW the line."
That's about it for the most part. Above the line deductions. Write off your fees and equipment, your interest, your cable modem etc.
Also Traders may elect Mark to Market which eliminates the Wash Sale problem and in the unfortunate situation where the year's net losses exceed $3,000, allow more to be deducted. But this in your case would likely be a negative. You have no other income to use the excess losses against!
Colin |
