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Strategies & Market Trends : Income Taxes and Record Keeping ( tax ) -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (337)	12/28/1997 4:34:00 PM
From: Colin Cody	Read Replies (1) \| Respond to of 5810

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. . >> 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.. . >>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... . 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??? . 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. . >>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. . >>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. . >>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? . Colin

To: Box-By-The-Riviera™ who wrote (337)	12/28/1997 4:41:00 PM
From: Greg Peckton	Read Replies (3) \| Respond to of 5810

Hello everybody, 1997 was my first year as a trader/investor and I lost quite a bit if you look at the balance with the two brokers I trade with. I was just going through the past few posts on this thread and I get the impression that I was supposed to save all the broker statements for individual trades that I made. Is that correct? I thought the statements were only for our reference and we get a detailed 1040(not sure if the number is correct) from the borker(s) at the end of the year that we can use to apply for tax refund. I think I am missing something here. If the sum total of all my trades show a loss than that's a loss, right? It does not really matter what I made/lost on each individual trade - is my assumtion correct? I just threw away the statements of all the lousy trades I made and until this moment never thought those statements would be of any consequence. I am very confused and need help. Here's the complete scenario : I lost nearly $21000 on all my trades (both stock and option trades) starting from 01/05/1997 till now and the $ balance in my accounts with brokers are near $0. I paid $4000 in taxes through my new job starting from 09/29/97 till now. What I was thinking of doing was show the loss in my trading accounts (no individual trades) and claim $3000 back for this year and carry forward the rest of the loss for the year(s) to follow. One last question : Am new to California; moved in from the beautiful and the tax-free state of WA. Does my state tax return look the exact same as the Federal return? Thank you and a peaceful new year to you all.