Day Trading: Mark-to-Market 475(f) Election?

Discussion in 'Taxes and Accounting' started by Cypherdude, Feb 14, 2018.

  1. These 2 questions are for US Citizens who day trade:
    1. How many of you who day trade have made the Mark-to-Market 475(f) Election?
    2. If you did make the Mark-to-Market election, did you also file Form 3115?
    I was looking into buying a year's subscription of Trade Ideas Pro. However, after reviewing the IRS rules, I realized if I did buy the subscription, which is fairly pricey, I might be required to make the Mark-to-Market election. To qualify for the IRS election, the IRS requires that:
    1. Your activity must be substantial; and
    2. You must carry on the activity with continuity and regularity
    I read that the IRS requires the number of trades per year must be at least 1,000 to 3,000 trades per year. This means, if I bought Trade Ideas Pro, I would be forced to make 1,000 to 3,000 trades per year.

    My understanding is, if you make the Mark-to-Market election, you cannot claim the lower long-term capital gain rate for investments of over a year even if they are in a different brokerage account.
  2. Robert Morse

    Robert Morse Sponsor

    Is your question, "how can I expense the cost of the program?" Why not contact your accountant. I expect he will suggest you create an LLC for your trading and that MTM is not necessary to expense expenses. This is a good resource.

    sperrum and KeLo like this.
  3. My concern is more about avoiding the IRS "wash sale rule." The IRS wash sale rule makes it harder to make profits for daytraders. The wash sale rule can create a taxation nightmare for US citizens, not to mention the Federal and state tax reporting complexities.
    If I were to use an LLC:
    1. Would this avoid the wash sale rule?
    2. Wouldn't I be subject to double taxation, once for the LLC corporation and once for myself?
    Thanks in Advance.
  4. Robert Morse

    Robert Morse Sponsor

    1-you need MTM for that.
    2-no. A single member LLC is a disregard entity to the IRS. Filters to your own taxes. You should consult a tax expert like Green. This is an important decision to rely on a forum for information.
  5. Avoiding the wash sale rule would be my primary concern.

    Thanks for your help.
  6. sprstpd


    Then you need to declare MTM. There are important deadlines associated with this declaration that you need to adhere to plus you need to demonstrate a certain trading activity level. I would suggest buying the GreenTraderTax tax guide as a first step and carefully read about your options. Then if you need further help, set up a consultation with someone there.