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Strategies & Market Trends : Income Taxes and Record Keeping ( tax ) -- Ignore unavailable to you. Want to Upgrade?

To: Dr. D who wrote (1707)	1/2/1999 6:31:00 PM
From: mod	Respond to of 5810

I don't believe there are any explicit IRS rules about day trading a Roth or any other kind of IRA. However, rumor has it you are not allowed to operate a "trade or business" within an IRA. But since day trading can result in trader status, and is therefore reported on a Schedule C as a "business", the question is whether this prohibition could be applied to day trading in an IRA account. Theoretically, if you do something you're not supposed to within an IRA (like buy Beanie Babies for investment purposes), there can be severe penalties. I don't know if the IRS has ever ruled on this, or whether it is just a hypothetical concern. Colin or Kaye, do you know if there have been any court cases on this? I actively trade through both a Roth and a SEP-IRA, in addition to taxable accounts, so I'd rather not have to worry about this potential problem.

To: Dr. D who wrote (1707)	1/2/1999 10:27:00 PM
From: Colin Cody	Read Replies (3) \| Respond to of 5810

Is there a IRS rule regarding day trading a Roth Ira account? I mean, in terms of how long you must hold the position before taking profits. NO there is no rule. You may have seen me CAUTION against using an IRA for trading, but I've since re-thought my concern and now take a neutral position on the matter. When a client retains me to do some real research on it I may change my mind again. I was watching CNBC's Money Bowl yesterday (1/1/99) and one of the guests alluded to this rule but did not clarify it. The people on CNBC knew little about taxes and traders (if you mean the CEOs from Waterhouse etc). BUT I think you may be referring to a Catch 22. To have an "official day trading account" you need to have a type 2 margin account (some SEC rule I presume) and an IRA is prohibited from borrowing in some cases, and is subject to UBTI taxation on borrowed funds in other cases. Of course one can trade with a regular type 1 cash brokerage account rather than a "daytrader account." Colin