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Strategies & Market Trends : The Covered Calls for Dummies Thread -- Ignore unavailable to you. Want to Upgrade?

To: Dominick who wrote (3183)	12/21/2001 8:38:53 AM
From: LemurHouse	Read Replies (2) \| Respond to of 5205

Moreover, it is irritating that the IRS considers you to be either one or the other; one cannot be both. As I understand it, if you elect trader status, then all investing gains/losses are treated as shortterm trading activity. That is, even long term capital gains/losses resulting from "investment" activity are taxed as short term. So, while you might be operating a legitimate trading business and able to write-off legitimate costs associated with that business, you are penalized by having your long term capital gains taxed as if they were part of that business, even if they are entirely unrelated. A very significant penalty. This in my view is the biggest downside with electing trader status. This treatment of long-term cap gains is obviously different than the treatment given to investors who have "normal" occupation such as doctor, pipefitter, etc. Why should someone who, say trades options as his sole source of income and who otherwise qualifies for trader status be penalized for having long term investment activity (or conversely, an investor be effectively prevented from electing trader status even though he qualifies under any reasonable standard.) T'ain't fair. But then neither is the college football ranking system. Ah well.