Mark to Market Acct

Discussion in 'Taxes and Accounting' started by Swish, Jan 16, 2002.

  1. Swish


    If I elect to file for a change of accounting method and use mark to market accounting, does anybody know if I can report gains and losses (on Form 4797, Sales of Business Property) on an account level instead of on an individual transaction basis??

    Essentially, doing so would allow you to report one line per account equal to the following: Value at end of year - value at beginning of year +withdrawals during year - deposits during year.

    It seem logical that such would be allowed as reporting on an account basis represents the sum of all losses and gains (and wash sales and maximum capital losses do not apply).

    Has anybody seen anything from the IRS to confirm or deny this??


  2. trdrmac



    This is speculation on my part from Section 475 pages 508-509 in JK Lassers Tax Guide.

    You can report gains and losses on 4797 as a single line and roll it to Schedule D. However, if you are audited you will need supporting documentation of the transactions. additionally, if you are carrying over gains and or losses in securities held, this is considered a change in accounting method and needs to be reported on Form 3115. So unless your account is all cash as of Dec 31, this adds a wrench to the equation.

    The election for 2002 must go in with your 2001 tax return so if this is a consideration, you may want to seek professional advice.
  3. trdrmac


    The Tax Guide refers to mark to market for day traders or active traders under section 475. Also the tax guide is for year 2002. I usually get one each year, they are about $14 E&Y also sells one and Arthur Andersen is selling a Tax Guide/Paper Shredder combo this year from what I hear.

    If you have any other questions you can email me or post here.

  4. I've used manuals from Bob Green to do my taxes. I'm sure there are other sources. To use mark-to-market for 2001, the declaration had to be made by April 15, 2001. The profit/loss from trading was rolled into Form 4797 not Schedule D in tax year 2000.
  5. trdrmac


    Desert, I said use 4797 to list your gains and losses, but if you did not roll it to schedule d, then where to you put the gain or loss?
  6. 1040 line 14
  7. aldrums


    Below is a paragraph from the following IRS link that does not seem to agree with your statement above. I held 6 stocks overnight from 2001 to 2002 and marked them to market "by treating them as if they were sold (and reacquired) for fair market value on the last business day of the year." I don't see any problems with this according to the IRS.

    Mark-to-market election made. If you made the mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Schedule D. In that case, securities held at the end of the year in your business as a trader are marked to market by treating them as if they were sold (and reacquired) for fair market value on the last business day of the year. But do not mark to market any securities you held for investment. Report sales from those securities on Schedule D, not Form 4797.

  8. trdrmac


    I was wrong on the schedule D, does look like Desert was right and line 14 on 1040 would be correct. As for the 3115, here is the quote from the page IRS LINK:

    After making the election to change to the mark-to-market method of accounting, you must change your method of accounting for securities under Revenue Procedure 99-49. Revenue Procedure 99-49 requires you to file Form 3115, Application for Change in Accounting Method. Follow its instructions. Label the Form 3115 as filed under "Section 10A of the APPENDIX of Rev. Proc. 99-49."

    Once you make the election, it will apply to 2002 and all later tax years, unless you get permission from IRS to revoke it. The effect of making the election is described under Mark-to-market election made, earlier.

    For more information on this election, see Revenue Procedure 99-17, 1999-1 CB 503

    Here the example from JK Lasser which makes sense:
    If you have a basis of $100 and it is worth $150 (think yhoo 99:D ), you would report a $50 Gain and your new basis is $150. If you then sell for $90, you would report a Loss of ($60).
    This is what I think you would report on 3115, there is also a separate address where this gets mailed. If I could figure out how to do it, I would post the link.
  9. jsmith


    I'm filling out my Form 3115 for the 2nd part of my election for Mark-to-Market. I already included my election when I did my taxes for 2000.

    There are a whole bunch of questions on this 3115 that I don't
    really have a clue. Would it be safe to just put "No" for all of
    them because I don't think they apply to me? Can someone
    give me some details on how they answered the questions on
    the first 3 pages?

    Or maybe remove the name/address, scan the 3115 and send it
    to me so I know how it's done?

    It looks like I just put Yes for #1 and write Rev. Proc. 99-17
    and put No for everything else. And I checked Individual
    and Financial Prodcts and/or Financial Activies on top.
  10. Hi jsmith

    Try these links for help with your MTM or Form 3115

    Take care and hopefully someone that's a certified tax account here can help with your question because in my's an important question.

    Nihaba Ashi
    #10     Feb 28, 2002