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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: Baghul who wrote (97)	11/3/1998 12:56:00 AM
From: Trader J	Read Replies (1) \| Respond to of 56535

Baghul, Check greencompany.com It is a very good site related to trading and taxes. You may elect a mark-to-market accounting status which is a new law for individual traders if you trade often and consistently enough. There are plusses and minuses to it though. It does eliminate the wash sale rule. You also cannot deduct your full losses the first year, must prorate over the next four. Once you file trader status, it is a lifetime filing and you cannot go back. Many of the laws regarding this filing have not been finalized and could bite you in the butt retroactively when they are. Be careful. I have elected not to file this way. I have decided instead just never to lose money on a trade again. :0) Jeff

To: Baghul who wrote (97)	11/7/1998 7:31:00 AM
From: kendall harmon	Respond to of 56535

There are three different types of persons as far as the IRS is concerned: a trader, an investor, and a dealer. A good rule of thumb for seeking trader status is that you make at least 200 trades a year. If you opt for trader status, you end up on schedule C which means there is no limit to the losses you can take and you can deduct all business related expenses. However, you can end up in a tax bracket as high as 39.6% as you probably know. As for the wash sale rule, let me quote carefully: "The wash sale rule will result in the disallowance of a loss if substantially identical stock or securities are acquired (or a contract to acquire is entered into) within 30 days before or after the sale of the stock or securities at a loss. When the wash sale is applicable, the loss is disallowed, and the basis of the new property is deemed to be increased by the disallowed loss." Note the last sentence and reread it several times--this is the important part where the amount lost is added to the basis of the newly purchased stock.

To: Baghul who wrote (97)	11/7/1998 7:40:00 AM
From: kendall harmon	Respond to of 56535

Just to hammer home the point about the wash sale rule, I quote from JK Lasser's income tax guide 1997, p. 429: "Although the loss deduction is barred if the wash sale rule applies, the economic loss is not forfeited for tax purposes. The loss might be realized at a later date when the repurchased stock is sold, because after the disallowance of the loss, the cost basis of the new lot is fixed as the basis of the new lot and adjusted (up or down) for the difference between the selling price of the old stock and the purchase price of the new stock...."