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

To: Colin Cody who wrote (997)	4/12/1998 10:08:00 AM
From: marc chatman	Read Replies (2) \| Respond to of 5810

I have a question for anyone who can help regarding treatment of margin interest. Can anyone tell me whether margin interest which I paid in 1997 on my brokerage account is deductible for federal income taxes? I thought perhaps it could be an itemized expense under Schedule A, But Schedule A appears to point me to Form 4952, and the instructions there seem to exclude interest allocable to a passive activity. (Isn't stock market investment passive?) Also, if Schedule A is applicable, does it matter whether I recognized a net gain for the year for all trades, or only with respect to the transaction for which I paid the margin interest. The only other thing I can think of is to try to apply the expense as a part of the trade to which it pertained on Schedule D. That could be difficult, though, since the broker doesn't allocate the interest to a particular trade. Thanks in advance.

To: Colin Cody who wrote (997)	4/12/1998 5:59:00 PM
From: Brendan W	Read Replies (1) \| Respond to of 5810

Colin, March was my first month of trading. I did about 200 tickets. Now, I'm contemplating accounting for it. My trading is very messy to account for ... I'm buying and selling the security at the same time ... a bought position can have multiple sells... a sold position can have multiple buys, etc.. The trading is all short-term. I don't want to do what I've done in the past which is to have a spreadsheet where I split up a transaction's purchase amount or sale proceeds to create tax lots. Do I have to buy software that creates the tax lots for me? I was hoping instead on a monthly basis just entering my transactions into a spreadsheet and calculating an aggregate monthly gain by netting the grand total of proceeds against the grand total of cost, while manually isolating and rolling forward any unsold inventory. I would report the monthly amounts as a line item on Schedule D, and provide the detail as an attachment. I know this is not what the Service asks for, but it's so much easier, and the correct tax answer is achieved. What could they do if I pay the correct amount, have good deductions, provide all the information ... just not in the exact format they request?