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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: rydad who wrote (35228)	4/3/2001 4:12:16 PM
From: djia101362	Read Replies (2) \| Respond to of 65232

rydad- essentially the election is convert your status from investor to trader, allowing you to deduct all losses in the year incurred rather than only being able to deduct $3000 per year. if you have gains in 2000, it is not advisable. if you have substantial losses, like many seem to have, then it is certainly worth looking into. there are a few key requirements that must be met, one of the most important being holding period, in order to qualify for making the election. from the standpoint of anyone with capital losses that may exceed their lifespan, it is definitely worth doing, even if you are a borderline case. the average IRS audit does not take place until more than 2 years after a return is filed. in those two years, you will have wiped out a substantial part of your income tax, hopefully allowing the market to recover and your financial condition to do the same. in the event of an audit, which is usually quite remote, you have substantial authority and if your fact patterns are anything close to a "trader," the IRS should not assess any penalties. in effect, worse case scenario, you pay interest on back taxes. each person needs to evaluate his/her tax situation and trading patterns to determine if it is a feasible election, and always consult your tax advisor. the one drawback is that once a trader, always a trader, and therefore you do not get the benefit of long-term capital gain treatment, but there are way around this. right now, for most in this situation, LTCGs are not an issue and rebuilding capital is priority number one. this election can go a long way to help one rebuild capital more quickly.