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

To: Trader J who wrote (502)	10/8/1998 1:45:00 PM
From: Kaye Thomas	Read Replies (2) \| Respond to of 1383

Hi Jeff, thanks for the kind comments about my web site. No one can tell for certain whether someone with your facts qualifies as a trader or not. It appears that you meet one of the two requirements clearly, because all of your activity is directed toward capturing short-term swings in prices as opposed to investing to obtain interest, dividends and long-term appreciation. The other requirement is where you are in a gray area: is your activity substantial and regular enough to be considered a trade or business? The answer may depend not just on how many trades you make, but also on how much time you spend at it. There aren't any bright lines, or even many cases with facts similar to these. My guess is that if you spend upwards of fifteen hours a week at it on a regular basis and have a continuous stream of trading activity over an extended period, the Tax Court would agree that you're a trader for tax purposes. On the other hand, if you spend ten minutes reading a tip sheet and make your four trades, maybe you lose because that doesn't look much like you're carrying on a business. Remember that even as a trader you're limited to $3,000 of loss deduction unless you file a valid "mark-to-market" election. There's no guidance out on this election yet, but the IRS has promised to issue some by the end of the year. Kaye Thomas, author Fairmark Press Tax Guide for Investors fairmark.com