trade2retire, I'm pretty sure the MTM statement has to include the specific tax ID for which it applies. your situation is a little bit complex though
trade2toretire 100% no. how could you trade accounts in your wifes name and expect to be able to even claim trader status on them much less mtm? if you trade accounts not even in your name then you're not even considered a full time trader. you can't even trade joint accounts and file as trader status unless both you and your wife trade the account. why are the accounts in your wifes name? you must get all the main trading accounts in your name. you can still have a few accounts in your wifes name that are filed as sch d but the main income producing trading accounts must be in your name.
monstercat thanks for your informative replies. Here's a hypothetical scenario that could possibly cause problems in the future for those who elect MTM: let's say a trader has been using MTM status in 2007(election was timely made in 2007) . tax return and form 3115 for 2007 will be filed in Oct. 2008 Now say the trader did little or no trading for the first few months of 2008, should that trader send in a MTM election again in april 2008 if they think they might restart the daytrading business later in 2008? or do they automatically get MTM status again as soon as enough trading is done to reach a business level of activity again?
also, to continue the scenario, if there were gains during a period of 2008 when the level/frequency of trading did not rise to a level considered "business activity", are those gains automatically considered capital gains rather than ordinary income? when the IRS uses the phrase "ordinary income" what exactly does that include anyways?
datcruncher you're confusing a few things. electing mtm trading is just electing a method of accounting. for instance investors use cash accounting method. mtm accounting marks all prices at year end of any stocks held as loss or a gain versus a regular investor being able to defer loses or gains until they actually sell the position. mtm accounting has nothing to do with being able to write off expenses as a trader. if you work 8 months as a full time trader you can only write off 8 months of expenses. IF YOU ELECTED MTM AND DOWN THE LINE YOU EXIT THE BUSINESS YOU SIMPLY CHANGE BROKERAGE ACCOUNTS AND ELECT THE NEW ACCOUNTS AS INVESTOR ACCOUNTS. every year i do my returns i designate my trading accounts as 4797 mtm accounts and fill out form 4797, i also have some long term accounts that are investor accounts and recieve the favorable long term rates and are filed under sch d. once you flag an account lets say with e trade as a mtm account it stays that way forever. one must use different brokers for different types of accounts. i would suggest traders use a trader cpa for at least the first few years they file as mtm or full time traders
monstercat, where are you getting this info that you have to change brokerage accounts? how exactly are you flagging accounts(is your broker making some kind of notation on the account, or do you flag it somehow on your tax return?) I was under the impression that it works like this: when you are running a daytrading business, you have to have segregate your holdings into different accounts (i.e. one account for longer-term holdings subject to capital gains rates and one account for your daytrading business subject to MTM) but once you shut down you daytrading business, I don't think you have to change brokerage accounts or flag anything. all of your accounts simply become regular capital gains accounts since you are now an investor who is not running a business. but if you restart your daytrading business you have to once again designate which is the MTM account
datacrunch i've been filing mtm and as a trader for 9 years now. i flag the investor and mtm accounts on my return. THE REASON I HAVE DIFFERENT BROKERS FOR EACH TYPE OF ACCOUNT IS BECAUSE I WANT TO KEEP THEM SEPERATE IN THE IRS EYES. LETS SAY I HAD 2 ETRADE ACCOUNTS. 1 MTM AND 1 SCH D. LETS SAY I HAD A HUGE GAIN IN THE SCD D ACCOUNT AND DIDN'T SELL TILL THE NEXT YEAR. THE IRS COULD SAY WAIT A SECOND WERE GOING TO CLASSIFY THIS AS A MTM ACCOUNT. again this is done for safety purposes than more of the letter of the law. much of the things on trader taxation are not writtten in stone such as shifting gains from your mtm income to offset your sch d expenses so you don't show a lose. green and co developed much of these theories such as piles of footnotes and it works.
^Monstercat, I see what you are saying. I'm not trying to pester you or split hairs here but it's hard to find someone who has filed 9 years as MTM, so I'm hoping you'd be willing to offer additional detail on the following issues: 1) if you file MTM, is it possible to have this issue occur: you have a net operating loss one year. the next year you don't trade much, you only trade as an investor. If you make money as an investor is that capital gains income tax-free since it can be applied against the previous net operating loss? 2) If the trader did little or no trading for the first few months of 2008, should that trader send in a MTM election again in april 2008 if they think they might restart the daytrading business later in 2008? or do they automatically get MTM status again as soon as enough trading is done to reach a business level of activity again? 3) since you add footnotes to your return, does that necessarily mean paper filing or is there tax software where you can do this?