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Strategies & Market Trends : IRS, Tax related strategies--Traders -- Ignore unavailable to you. Want to Upgrade?

To: Dominick who wrote (1288)	3/4/2001 6:18:28 PM
From: Colin Cody	Read Replies (1) \| Respond to of 1383

Dominick, A trade or business does not imply that you advertise. It means that you SHOULD deducted your expenses, of course, but it does not mean that you live off the income, though there's special rules for securities traders that the activity must be "substantial" to the taxpayer. i.e. not a casual activity. The IRS Code specifically states that a trade or business within a tax deferred or tax-exempt entity is subject to UBTI taxation. I don't understand what you mean about an IRS audit? We're talking about IRAs here right? Are you saying this was an audit of your IRA or of your personal 1040 tax return? I am talking about IRAs, not 1040s. Completely different situations. As a side note - while it is true that you may have "a right" to buy and sell assets within and without an IRA, if you do so in a way that is not in accordance with the various rules set forth by Congress and the IRS you can subject the IRA to UBTI taxation and/or disqualify the IRA causing an immediate taxable deemed distribution to the beneficiary/owner. BTW - UBTI is VERY COMMON, and many taxpayers pay it on IRS form 990-T each year. Complete disallowance of an IRA is more rare because there are severe penalties to the administrator/trustee/bank/stockbroker if they allow you to enter into a prohibited transaction resulting in disqualification. Colin