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

To: GT who wrote (378)	6/27/1998 11:45:00 PM
From: Colin Cody	Read Replies (1) \| Respond to of 1383

gorcon, One thing I HAVE learned is that virtually NO ONE (except yours truly)(g) knows enough about TRADER STATUS to keep them out of trouble. . TAKING LOSSES ...I was looking at online investor where an article stated that one should try and avoid being classified as a "professional trader" because otherwise you would only be able to deduct up to $3000 worth of [NET] losing trades per year while having to pay taxes on all [NET] gains. IS THIS TRUE !!!!!!!!!!!!! YES THIS IS GENERALLY TRUE (but there is a new exception available since late 1997) . This year I have lost maybe $10,000 but also made over$20,000 and was DEFINATELY counting on subtracting the 10,000 loss from the 20,000 gains. IF THAT'S HOW YOU END UP ON DECEMBER 31st THAT'S EXACTLY HOW YOU DO IT! NET YOUR GAINS AGAINST YOUR LOSSES. . I guess my questions are 1) What determines "professional trader" status MANY, MANY THINGS ABOUT THE SUBSTANCE OF YOUR ACTIVITY, INCLUDING THE AMOUNT OF TIME YOU SPEND AT IT, THE AMOUNT OF MONEY YOU MAKE AT IT, THE REASON YOU BUY AND THE REASON YOU SELL EACH TRADE. . 2) How can I best set up my trading status so as to be able to subtract all losses. IF YOU ARE PLANNING TO HAVE SIGNIFICANT LOSSES, HERE'S A TIP. STOP RIGHT NOW!!!!! (g) A PROFESSIONAL TRADER CAN DEDUCT EVERY ONE OF HIS ANNUAL NET LOSSES UNDER A VERY RARE TAX ELECTION. . 3) I want to be able to sell a loosing position - and turn right around and re-buy it - and subtract the first loss against the eventual profit when I re-sell the second position (in the same stock). I called the irs on this one and was told that I can buy back a loosing position in less than 30 days and apply the loss to the eventual gain - but not until I sell the second position. YOU SAID THE SAME THING THAT THE IRS SAID!!!??? AND THE IRS TOLD YOU RIGHT. THAT'S THE WAY IT IS DONE. BTW THE RARE ELECTION (ABOVE) ALSO EXEMPTS YOU FROM THIS RULE TOO... . COLIN

To: GT who wrote (378)	6/28/1998 12:40:00 AM
From: WallStBum	Read Replies (2) \| Respond to of 1383

I want to be able to sell a loosing position - and turn right around and re-buy it - and subtract the first loss against the eventual profit when I re-sell the second position (in the same stock). Colin knows better than me, but if you don't sell your second position before 12/31/98, you won't get to deduct the loss from the first position on your 1998 tax return. This is whats known as a wash sale. It's purpose is to keep people from selling losing positions on say 12/29, deducting the loss in that tax year and then buying back the same stock on say jan.2 of the next year, reestablishing the same exact stock position as before, but getting the writeoff. I am not aware of ANY provision to be able to report greater than 3,000 in capital losses in one year, even for traders. Again though Colin would know better. dax