illiquid..... Please get with a good CPA.....But, I believe you have to get special permission from the IRS to get out of MTM accounting.
"No, that is incorrect. Trading income is not considered earned income." but when you elect to use mtm, then it might not be deemed as trading income but as earned income
From Schedule D Instructions (D-3): http://www.irs.gov/pub/irs-pdf/i1040sd.pdf From Schedule SE (SE-3): http://www.irs.gov/pub/irs-pdf/i1040sse.pdf From the above, it is clear to me that securities traders (i.e., no 1256 contracts) do not receive earned income from their trading activities. It also appears that commodities "traders" (not dealers) also do not receive earned income from their trading activities. I have always been confused as to why someone would declare MTM for commodities trading since 1256 contracts are always marked to market anyways, right? Is there a benefit to declaring MTM for 1256 contracts? I believe (but am not completely sure) that you can declare MTM accounting for securities trading while not declaring MTM accounting for commodities trading. You would have to separate them out as different businesses. Anyone want to confirm this? Thanks.