Filing tax return as Trader Status and Mark to Market Election

One more attempt:
If you meet the IRS guidelines for Trader status, then you can deduct trading expenses. That is it, there is nothing more to it.
A completely different and separate issue is whether you want to declare market to market or not.
SE taxes have NEVER, EVER been due on capital gains. There is no tax software or qualified account that will tell you otherwise. The confusion can come when you are in a situation where your capital gains are viewed as ordinary income, like when I was a market maker on the floor or if you choose to pay yourself a salary for retirement account purposes.

That is the easy stuff. The hard parts are determining if you qualify for Trader status if you don’t trade they way they think you should, whether or not you should elect market to market depends completely on your individual situation, and whether it is easier or better for you to form a company for your trading.

I am a profitable section 1256 trader, so I formed a company for my trading, don’t choose mark to market election, get 60/40, and don’t pay any SE tax.

 

Just to show how stupid bondtrader50 is, here are the IRS guidelines:
http://www.irs.gov/taxtopics/tc429.html
To quote the IRS:
“Gains and losses from selling securities as part of a trading business are not subject to self–employment tax.”

 

dont believe this is correct. even a non mark to market trader status must be declared prior to filing. you dont automatically gain trader status without declaring it by april i think. at least that is how it worked when i did it years ago.

 

Have fun with your first audit! Just act like the moron that you are and you should be able to avoid some of the penalties.

 

Ditto.


You're not going to use the story, Mr. Scott?

No, sir. This is the West, sir. When the legend becomes fact, print the legend.

 

Vhehn thinks there is a designated form for declaring Trader status and bondtrader50 thinks all traders have to pay SE taxes. I have given all the free advice I am going to, believe all the falsehoods you like. Now I remember why I post on a different website for actual traders, and leave this one to its ever deteriorating condition.

 

I never said that asshole Now you're forming entities.

Jones posted that he traded futures. That's who I was posting to.

 

To those who are interested. Here is a fairly current seminar on trader taxes (apr 09), 60/40, SE taxes, forming LLC's and the like.

http://www.advantagefutures.com/media/taxstrategiesseminar.mov

 

The other major advantage of claiming MTM is that you can carry forward or back your net operating loss for losing years and offset them against net operating gains in future years. As an example if you had a NOL of $50,000 in 2008 and a net operating gain of $40,000 in 2009, you will offset the $40,000 NOG against the $50,000 NOL and not pay any taxes in 2009. Furthermore, you get to carry over the excess of $10,000 NOL to 2010 and assuming you have a NOG in 2010, can offset this gain against the $10,000 remaining NOL excess.

 

Then I don’t understand what you are saying because here are your quotes from this thread:

“Trader status will get you the 60/40 treatment”
This is incorrect, all section 1256 contract receive 60/40 treatment whether or not you choose to file as the IRS defines a Trader in Securities. A person using Trader status gets 60/40, and an investor who is not a trader gets it. You lose it if you choose mark to market for those contracts.

“Trader status gives you 60/40 AND you do pay SE tax.”
This is additionally incorrect, as the link to the IRS website I gave clearly states: ““Gains and losses from selling securities as part of a trading business are not subject to self–employment tax.”

Also, forming an entity to trade under does not affect anything with regard to Trader status, SE tax, mark to market, and the ability to deduct expenses. A trader can choose to do any of those things or not regardless of forming an entity or not.

Think of mark to market as something that is clearly defined by the IRS as something you must declare in the proper way by the proper time, while Trader status is something you can use when and if you want to (if you qualify) by filing your taxes in a certain way, it is not something you officially declare or renounce.