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

To: Nelson Chang who wrote (1999)	3/17/1999 10:08:00 AM
From: Robert A. Green, CPA	Read Replies (2) \| Respond to of 5810

Tradertax.com mark-to-market elections Excerpt from our 1998 Trader Tax Guides at tradertax.com Traders have three different procedures for making mark-to-market elections depending upon when the election was or will be made: 1. 1997 and/or 1998 tax returns filed before March 18, 1999 · The mark-to-market election is valid as already filed, if a Trader filed a 1997 or 1998 tax return before March 18, 1999 and that Trader meets either of the two conditions listed below. a) The Trader properly reflected application of the mark-to-market rules (including any Code Section 481 (a) adjustment if necessary) on their original tax return for the election year; ….or b) The Trader clearly demonstrated on the tax return filed their intent to make the election for that year. The Trader must then file an amended return for the election year before June 17, 1999 that properly applies the mark-to-market rules (including any needed Code Sec. 481(a) adjustment). Notes about elections in this 1st procedure · Our 1997 Trader Tax Guide included an example footnote describing an election to use the mark-to-mark accounting method. The 1997 Guide also showed Traders how to correctly apply these rules and make Sec. 481 adjustments. · We correctly applied mark-to-market accounting and made a proper election for our many Trader Tax Preparation Clients in 1997. · We imagine that many Traders, who did not use our tax Guide or services for 1997 tax filings, may not have met the first condition above. These Traders must meet the 2nd condition in order to have their 1997 tax returns accepted with mark-to-market accounting. · We can consult those Traders on the filing of their amended 1997 Form 1040 tax returns, which are due June 17, 1999. 2. Elections for 1998 tax returns, which are filed after March 18, 1999. · The election is made by attaching a statement to your 1998 original tax return filed by its due date including extensions (latest extension date is October 15, 1999). 3. Elections for 1999 must be filed by April 15, 1999. · The election is made by attaching a statement to either your 1998 original tax return or your extension Form 4868 due by April 15, 1999. 4. Elections for 2000 and thereafter. This was intended to apply to 1999, but it is too late and the above 1999 rules apply. · The proposed mark-to-market regulations stated that the IRS would provide Traders with a form for making the election and that the form would have to be filed no later than 2 months after the start of the tax year for which the election is being made. Automatic approval by IRS and the requirement to file a "change of accounting method" Form 3115 - As stated above and in the prior section, a mark-to-market election is a "change of accounting method" which must be reported on Form 3115. For some changes, a taxpayer needs IRS consent in advance, for other changes the consent is automatic. · The IRS Revenue Procedure 99-17 states that if a Trader follows the conditions of the procedure (stated above), then the IRS grants automatic consent to this "change of accounting." · Except for 1997 elections that were properly filed (see 1a above) for which no further action is required, all Traders electing mark-to-market treatment must file a Form 3115 and attach it to their timely filed (including extensions) original income tax return for the year of change, and send a copy to the national office. The usual rules for taking any resulting Sec. Code 481 adjustment into account apply (generally ratably over four tax years beginning with the year of change). · Note about example Elections for all years - You can see example Elections for all years in our "1998 Trader Tax Return Examples Guide." Notice the above excerpt says the Form 3115 must be included with a timely filed tax return. I think if you do not file your 1997 tax returns by March 18, 1999 electing mark-to-market, you miss the boat. tradertax.com

To: Nelson Chang who wrote (1999)	3/17/1999 8:26:00 PM
From: Colin Cody	Read Replies (1) \| Respond to of 5810

Nelson, Richard posted some good points here. The calculations of the taxable income are not changed as of March 18th. What happens on March 18th is new rules go into effect regarding 1) How to go about electing the Mark-to-Market method and 2) Getting IRS consent for making a change in accounting to the Mark-to-Market method. Prior to this it was a simple matter of just "clearly indicating" you wanted to use MTM on your tax return. BTW you can have until October 15, 1999 to make the 1998 elections and filings. you can read more details under "1998 elections" at: traderstatus.com Colin