Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Robert A. Green, CPA who wrote (246)	3/22/1998 2:17:00 PM
From: Colin Cody	Read Replies (3) \| Respond to of 1383

Robert, regarding "2. Traders may report their year-end "unrealized" gains and losses on Schedule D. You would probably choose this option if you have unrealized losses. Those unrealized losses reduce your realized capital gains. If your net capital loss exceeds the $3,000 limitation, then you may report the excess unrealized losses on Schedule C. We suggest you explain this treatment on your tax return in a memo." . Would you please provide references for this theory... . Colin

To: Robert A. Green, CPA who wrote (246)	3/25/1998 10:25:00 PM
From: Robert A. Green, CPA	Respond to of 1383

Wash sale rules do not apply to traders electing mark-to-market accounting method. There is some confusion on the wash sale rule for traders and it is clearly explained in our TRADER TAX RULES & TAX RETURN REPORTING GUIDE - EDITION 3. You can order the entire guide for email or mail delivery for a charge of $25. Contact rgreen@greencompany.com Per RIA - 22,719 "Exemption of traders and dealers in securities from wash sale rule. The wash sale rule doesn't apply if the taxpayer is a dealer in stocks or securities and the loss is sustained in a transaction made in the ordinary course of the taxpayer's business of dealing in stocks and securities." Code Sec. 1091(a). Per CCH - "Traders are subject to limitation rules for short sales and wash sales. Although a trader does not maintain an inventory, he is subject to identification rules to determine a basis for the securities sold." There seems to be some contradictory tax research on the wash sale rule. RIA says a trader in securities (like a dealer) is exempt from the wash sale rules. CCH states that traders are subject to the wash sale rules. In Barron's article "Who's a Trader" dated December 8, 1997 it states, "the wash sale rule may plague investors but you, as a trader electing mark-to-market, are exempt-your losses on sales at any time will be fully recognized; and, as noted, even without a sale, so will your paper losses on securities under water at the end of the year." In my professional opinion, the wash sale rules clearly don't apply to traders electing the mark-to-market accounting method. I also believe that the wash sale rules should not apply to traders who do not elect the mark-to-market method as per RIA above. Perhaps, Colin, Joel, TCLAUDE (who posted the CCH research) or I can contact CCH and RIA to ask about this apparent contradiction. It makes no sense for the wash sale rules to apply to traders who trade the same securities many times within a day let alone a month's time.