here is some info i found: election process is in two parts. First the election must be duly filed on time (per above dates) and second the taxpayer must file a Form 3115 (Change of Accounting Method) with their tax return for the year of change. For example, for a 2005 MTM election, the election statement must be filed by 4/15/05 and the 2005 Form 3115 filed with the 2005 tax return, including extensions in 2006. That means the 2005 tax return Form 3115 can be filed by 10/15/06, if on 2nd extension. Lots of traders missed the mark-to-market (MTM) election for IRC 475(f) by the due date of April 15 for the current tax year. Without MTM, a trader is stuck with "capital loss" treatment and can not deduct their trading losses as "ordinary losses." This significantly reduces the traders opportunity for net operating loss refunds. We may be able to still help you. Read below and see which special situation and GTT solution may apply to you. http://www.greencompany.com/EducationCenter/GTTRecMTMMissed.shtml
You must file Form 3115 during the tax year for which the change is requested. You should file as early in the year as possible to give the IRS enough time to respond to the form before the original due date of the return for the year of change. If you do not file a Form 3115 during the year of change, an extension to file the form will be granted only in unusual and compelling circumstances. Hopefully you still have time to make the necessary changes, considering that you were given incorrect information earlier.
Im sorry about your brother, but what the hell does that have to do with trading and trader tax status? Are you on meds or something?? :eek:
I trade futures and futures options. Will a "Trader Status" prevent me from the 60%/40% (capital gain vs. ordinary income) treatment? It sure would be great if I could keep the 60/40 tax benefit and still deduct all expenses related to trading. Any advice is appreciated. Walt
Also, how does a firm such as Bright Trading avoid self employment tax while being allowed to deduct trading related expenses? If my understanding is correct, I believe that it is achieved through mark to market K-1 process. I'm just not sure how Bright does it. If this is allowabel, it's much better than the 60/40 rule because you get to deduct all expenses, treat all net earnings as capital gains, and deduct all trading related expenses. How does Bright Trading, or any other prop firm do it????
Trader status is fine, but if you also elect mark-to-market, you lose the 60/40 rate. No worries though, because you can elect mark-to-market for securities only and not commodities http://www.traderstatus.com/mark2mkt.htm
Does anyone know if you can elect M2M without trader status? I have looked for, but not found a clear answer in this.
thanks for the replies guys... however, a Trader Status will obligate you to pay self employment tax. How can you set it up the way Bright Trading does? They don't pay self employment tax and get to take deductions on trading expenses. I'm not sure, but I believe that the earnings are taxed as long term capital gains (I may not be correct on this last statement??)...