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

To: Colin Cody who wrote (390)	6/28/1998 9:22:00 PM
From: thomas hayden	Read Replies (1) \| Respond to of 1383

IRS and OPTIONS - I have been told that brokerage companies do not report option activity to the IRS, that we are on our honor to report. Can anyone verify. Also, could someone please tell me the current holding period and tax rates for long term capital gains. It seems like they change every six months.

To: Colin Cody who wrote (390)	6/29/1998 10:00:00 AM
From: GT	Read Replies (1) \| Respond to of 1383

Colin - not that I'm planning on a net loss for the year, but if I did incur say a $9000 net loss for the year, does this mean that I would take a $3000 loss this year, a $3000 loss next year and a $3000 loss the third year until the full $9000 loss was used up ? Thanks - Gorcon.

To: Colin Cody who wrote (390)	7/16/1998 11:30:00 AM
From: Robert A. Green, CPA	Read Replies (4) \| Respond to of 1383

Self-employment taxes do not apply to Traders. The IRS Restructuring and Reform Act of 1998 (including Technical Corrections) has clarified the question of self-employment taxes as it applies to Traders in Securities. "Effective for tax years ending after Aug. 5, 1997, the '97 Act allows securities and commodities traders to elect the mark-to-market accounting rules. Gain or loss recognized by an electing taxpayer is treated as ordinary gain or loss. Gain or loss from the sale or exchange of a capital asset is excluded from net earnings from self-employment for self-employment tax purposes." Our summary - A trader not electing mark-to-market accounting reports all gains as capital gains on Schedule D and self-employment taxes do not apply. A Trader electing mark-to-market converts to ordinary treatment from capital treatment but that ordinary income is excluded from self-employment taxes. Watch for our posting soon about the entire area of Trader taxation. Several experts at the big six accounting firms believe that when a Trader in Securities (who qualifies for this status - check with us) elects mark-to-market accounting treatment all their trading activity should be reported as ordinary gain and loss on Schedule C not Schedule D. This appears to consistent with the IRS regulations, code and the new act wording. Most postings on SI have been dominated by Colin Cody (the resident expert) and although we believe his postings have been very helpful to many users he may be wrong on a very important tax point. Colin and the SI thread has taken the opinion (including myself after being muscled by Cody and others) that all realized trading gains and losses should be reported on Schedule D whether or not the trader elects mark-to-market accounting. Reminder - If you elected mark-to-market accounting treatment you must stick with it for future years unless the IRS consents to you changing back. If you stop becoming a Trader, you are just out of the business and don't need the consent. If you made the change you are subject to a 4 year averaging for Section 481 adjustments. Check with us on 481 adjustments (its confusing). All of these changes,updates and our latest opinions and guidance are included in our latest edition to our Trader Tax Guide Edition 6. You can order it for $25 by credit card (secure form) from our Web site at greencompany.com Most of you should consider engaging us (or another CPA who is an expert in this area) to consult you on your individual tax situation. We can also prepare your tax returns at a low cost but high value to you.