It's illegal to do simultaneously because I've done it trading futures with 2 different accounts at IB . No biggie,upon reading the fine print it's okay as long as you have 5 seconds separating the trades that would close each other out if only held in 1 account.
Especially for Realistic, but anyone can reply please: I just returned from overseas and am doing my 2011 taxes. I trade through MB Trading which cleared through Penson. I have been with MB Trading and Penson for many years. I got my 1099 from Penson and exploded to see Penson assigning many of my trades as being wash sale and would not account for them as losses where, indeed, they were losses. This has never occurred before. I called MB Trading and was told there were a number of changes by Penson and that was one of them and many with MB Trading were upset. 1. I guess I am naive. I refreshed myself in IRS pub. and see I didn't qualify in 2011 as a "trader" and in fact I did not trade much in 2011. But I had always figured Wash Sales had to do with end of year attempts to dump a loser at end of December and buy it back in early Jan because one wanted the loss for the earlier year, but still wanted to hold the stock and would pick it back up in early Jan. Why would Wash Sales be a tax issue mid-year, for instance ? 2. I trade the same stock many times within a 30 day period, sometimes getting a loss on it. My style of trading demands I be in and out of the same stock within days or weeks. This all but stops my ability to do that ! 3. The MB Trading rep suggested I go to a CPA and have the CPA explain to me about being a "Pattern Trader" and having CPA register me with IRS as such. He said I could not enjoy that benefit until start of next year. OK.... I looked up the meaning of "pattern trader" and I don't get why this would absolve me from guilt of Wash Sales. Is this because IRS is a little more liberal to "pattern traders ?" I see Realistic that you made some sort of declaration with IRS; used some initials I am not understanding of. Can you explain that please ? 4. The use of different accounts and illegalities: In another life 12 years ago as a day trader, I got around the inability to short during down ticks by establishing a short position on stocks I thought I may wish to day trade short by shorting in a 2nd account and at the same time going long in my primary trading account on the same stock. This hedge remained in place until I wanted to short the stock and did so by simply closing out the Long. I was advised this was illegal by manner of SEC restrictions, and I stopped doing that. I assume the same notion applies with Wash Sales using two different accounts, but rather it would be a violation with IRS ? 5. Coincidentally, I just received via the US Postal Service a letter from APEX as being MB Trading's new clearing house. My suspicions are that MB Trading dumped Penson because of what the MB Trading rep had told me that "there were a number of things that had become unsettling with Penson." I'm wondering if APEX (I never heard of before) may let this wash sale rule slide ? Or is it, do you suppose, that letting it slide is not normal from your experience, and I should not plan to expect that ? Thank you for addressing these points and questions.
MB Trading did not dump Penson Financial as a clearing firm. Penson moved all their Prime Brokerage assets into a joint venture with Peak6. Penson still owns 94% of APEX. From your point of view, the current clearing relationship is the same, just safer. APEX has plenty of cash and very little debt. The reporting has not changed.....yet.
I think the initials he used "MTM" is "Mark to Market" You may find some answers to your questions, there are some good articles in the following links. http://www.tradelogsoftware.com/tax-topics/mark-to-market/how-to-elect/ http://www.greencompany.com/ I believe once you make the election, you need the IRS's permission to revert.
Thank you NoBias ! I had forgotten about green company. 1. Green Company certainly appears to be a possible solution not only presently but for future endeavors I anticipate for myself. Doesn't hurt to check on them. I took the time to review some on their site just now. It beats boping around locally for an appropriate professional source. It got me into the mark to market subject I'm sure you correctly concluded Realistic was referring to. 2. Tradelogsoftware I was not aware of. I clicked on its mark to market initial definition and followed its links to a more in depth coverage. It was addressed very well. It appears one must self assess themselves for the appropriateness of electing this with the IRS. I am on the fence now, but within the next few years I expect to be a busy boy trading. 3. What was a little ambiguous to me was any time I saw the reference "trader" on these sites, I wasn't sure it was with reference to a trader in a generic sense, or within the IRS context. In other words, can a generic trader elect to do mark to market ? Are there other alternatives to circumnavigate around the Wash Rule ? For instance, the MB Trading rep referred to the notion of being a "pattern trader" may be a solution, however that can be ? But here again, an entity like Green Company should be able to address all this handily. Thank you, again !
Those links were primarily posted to provide reference articles. Tradelog is nice {if your trading volume warrants it} however, you probably don't need to actually use green company as they are primarily an online accounting firm. You also probably don't need to make an MTM election either at the moment just respect the 30 day hold period at end of year to simplify tax accounting. i.e. Equity trading vacation a few weeks before year end until a few weeks into new year. [on same instruments] http://en.wikipedia.org/wiki/Wash_sale I would assume the term trader by Tradelog is referring to IRS definition of trader.
Again, thank you NoBias. Especially for the Wikipedia link. It opened the door for me particularly and appropriately for the trading I do: With Pairs trading, I can easily repeat a round trip trade within days or weeks, or in another scenario, put on layers of the same open pair trade before closing the layers out sequentially. In either case, there are loses on one leg or the other. I am frequently, then, trading the same security repeatedly within the Wash Sale time frame. Only in 2011 did Penson highlight with a separate area on its 1099 for me a location for which it identified Wash Sale incidents. In past years it never did, maybe because my trading was so heavy and figured it may have been a business for me. For 2011 my trading was very much lighter, and I can see how Penson would pick on me as a probable non-business. How it can presume to know when the occasion arises where it sees I have trading volume less than my previous, normal, heavy years that this lighter year is a non-business and thereby segregate out "Wash Sales" beats me. You would think a clearing house would want to know that of me or that I elected a mark to market with the IRS before crafting the 1099 style it produces for me. Back to Wikipedia. Wikipedia identified the Wash Sale piece as needing to cite sources. First, the piece was instructive for me, because I was unaware of the ability to apply the Wash Sale losses to the cost basis for the same security next time it was acquired within the Wash Sale context. But the piece did cite a source. The piece was literally a copy of the website source it made a link to, Fairmark.com. Fairmark was a little more lengthy and even it had a link to another one of its own pieces relating to Wash Sale. Both of them were helpful. Armed with this new education, I went to the headwarters, IRS Publication 550. (There are a number of years that elapsed since those websites and the current 550.) The beginning of 550 had a table of contents clearly referring to pages for Wash Sale and Mark to Market. Now I am very read up and prepared to take the final exam. Now if someone will just do the pencil whipping for me on my Wash Sale trades ! http://en.wikipedia.org/wiki/Wash_sale http://www.fairmark.com/capgain/wash/ws101.htm http://www.fairmark.com/capgain/wash/wstrader.htm http://www.irs.gov/pub/irs-pdf/p550.pdf Thanks again NoBias !
I'm kind of confused by this, but in my portfolio, I have shorts/longs together of diff't stocks. If you're talking about the same stock, I believe it's called, 'shorting against the box'. The bottom line is this, if you're not profiting, then all this nit pick stuff of tax consequences won't matter, and it's better you get out of this once and for all. If not, then make sure you're seeing profits and then talk to a REAL CPA! Politicians will do whatever they can to tax you, and change tax rules. I honestly believe, you should just worry about how to make money, than to worry about booking your losses. I mean, the $3K carryover is meaningless for losses, and might even outlive your lolz.