“Are You a Regular Investor or
a Tax-Favored Securities Trader?”
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DEFINITION: Mark to market
For tax purposes, mark to market means
resetting the value of say a stock or other asset to
its market price on December 31 (or fiscal year
end date if different)
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Do you trade stocks a lot?
I don’t mean making a few trades every day.
I’m talking about doing heavy-duty trading!
If you do trade a lot,
you may get a break from the IRS.
You see, if you qualify, you may be eligible for favorable federal income-tax treatment.
This is granted to individuals who trade stocks heavily enough to be classified as “securities traders” in the eyes of the IRS.
This is who does not qualify
for security trader status.
You won’t qualify if you trade stocks fairly actively but not enough to be considered anything but a garden-variety investor.
What are the advantages of gaining
security trader status?
The most important advantage of trader status is that you’re eligible to make the taxpayer-friendly mark-to-market election. (This valuable election is not available to garden-variety investors.)
When you have a mark-to-market
election in force, you gain important
federal income tax advantages.
For example, If you’re classified as a securities trader for federal income-tax purposes, (as opposed to being a garden-variety investor), you’re considered to be in the business of trading securities.
This means you can deduct your trading-related
expenses on Schedule C of Form 1040!
To get the whole story, including the implication of several important tax court decisions, here’s my advice…
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completely new article titled:
“Are You a Regular Investor or
a Tax-Favored Securities Trader?”