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

To: Brendan W who wrote (416)	1/8/1998 2:36:00 AM
From: Colin Cody	Read Replies (1) \| Respond to of 5810

Brendan, The court cases say that a TRADER is determined by the length of the holding period for the bulk of the stocks bought and sold and the SOURCE of the profit from those trades (market swings vrs. growth/appreciation). Just spending a lot of time and effort managing a portfolio and perhaps even executing a whole lot of trades is NOT a TRADER's trade or business. . Therefore your INTENT is important here. A TRADER is engaged PRIMARILY in SPECULATIVE ACTIVITY from which he derives "most of his income" which is FROM Short-Term Swings in the Market. Liang v. Commr. . Now, in addition, you MAY have SOME Long-Term investments. For those stocks you would be treated as AN INVESTOR. But putting them in a partnership where you were the managing partner, while it may HIDE it, wouldn't make it any more "legal", IMO. . The big issue is INTENT. Are you a DAY TRADER? Do you seldom hold positions over-night, for example. Do you MAKE MONEY AT IT? . There are the court cases that say that to be in the trade or business of a TRADER, requires, in effect, that the BULK OF YOUR INCOME comes from THAT trade or business. i.e. FULL TIME! . There is also the IRS Code / Regs that say if a TRADE or BUSINESS losses money... for three out of five years... it MIGHT NOT BE A TRADE OR BUSINESS AT ALL. . If you are a TRADER you "should know it", from the above. If you ARE a TRADER, then you are! If you would like to BUY AND HOLD one or two stocks for the long haul, that SHOULD NOT CHANGE your "Trader Status", IMO. . Colin