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

To: j g cordes who wrote (322)	5/25/1998 11:12:00 AM
From: Colin Cody	Read Replies (1) \| Respond to of 1383

jg, for example trading derivatives against a core holding, which can be very risky, but does the core holding period deny the status. Actually I'm not sure if "dirivative" are futures, which have their own set of rules, BUT holding a LONG-TERM Investment is not prohibited by a bona-fide Trader. But if a "Trader" had "too many" long-term investments I think the courts may doubt he is a Trader at all. All of this begs the question of who trader status was written for? Is it for the professional broker or pit person who trades their own account? For retired people who play the market? A Trader is an individual who buys a stock NOT because it is a "good buy", but because he wants to take advantage of the natural price swings that the security is expected to follow. If there is enough of this full-time activity, then the I.R.S. will go a step further and say that this Trading actually constitutes an active "Trade or Business". A "Trade or Business" goes on Schedule C, and not Schedule A of your form 1040 package. As time goes on the market will attract greater numbers of people who find themselves divorced from the work a day world, who instead use all or a portion of their money to leverage and trade for income. They are no different than someone trading commercial property, upgrading and flipping houses, horse traders, people who buy used cars and sell them for a small return as fast as possible or countless other "trading" scenarios. Actually there ARE differences, but basically they can ALL be Schedule C Trade or Businesses.