I filled out form 3115 (application for change in accounting method) for year 2000 last April. Is this something you have to fill out every year? Or is your tax status permanently changed until such time as you would no longer need to elect?
I can't find an answer to this anywhere. Does anyone know whether you have to elect every single year? Or just the first year?
My understanding is that the election is permanent for the person or enitity electing it. On chosen it sticks with you; however, I can't quote the source for that info so do your DD.
mjt, I found this at http://www.fairmark.com/traders/mtmacc.htm You're Stuck With It Once you make the election, you have to continue to use the mark-to-market method for all future years. You can change the election only with the consent of the Internal Revenue Service, and they generally won't grant this consent if your reason for changing is simply that the election didn't turn out to your advantage. Be sure you know what you're doing before making the election There is more to read on this subject at http://www.fairmark.com
Thanks for the replies. My actual concern was that I would lose my M2M status if I didn't continually elect.
re: MTM. If you later wanted to NOT use MTM, why couldn't you create a new entity to trade in, and move all your day trading there, (such as an LLC)? This would leave your personal account to have long term positions only (mutual funds, bond funds, etc.). Seems to me this would be a very defendable position. I can't beleive that the IRS would rule that because you are a trader, you could never maintain a longer term position in order to benefit from long term appreciation. I'm sure even the most aggressive of daytraders have some sort of investment vehicle that they don't trade daily and just invest (other than cash - money market). I must admit that in my case, I'm not very keen on my long term positions right now, but some types of accounts simply can't be day traded effectively (IRAs, pension plans, etc. - no margin - no shorts, just put options). True, there are ways, but it seems risky (from an audit standpoint) and I'm busy enough now, I can't imagine juggling positions in 5 or 6 accounts, somehow decompressing at the end of the day, reseaching overnight just to get up and do it all over again. Also, my real estate investing background teaches me that I could be both a real estate investor (tax breaks) and dealer (no tax breaks) at the same time, as long as what is being done is defendable. There are times and places for both, even by the same person. One way was to keep different bank accounts for both. For example, investment properties in their own bank acccount (rents, maint., expenses, etc.) taking depreciation and allowing the gain on sale to be taxed over time using an installment sale or exchanging into another property withouit tax altogether. Alternatively , the dealer property in another account (buy the house, rehab it, sell it, pay the expenses of fix up and sale, etc.), thus net proceeds are taxed w/o allowing for depreciation. Thus, separate accounts for different types of businesses, both defendable. Seems both could be possible?
You have the correct answer -- Permanent without IRS permission to go back. However, if you want documentation to support this position, go to IRS.gov, then to to forms and publications and download Publication 550. Page 64 provides a good summary -- you can also download Revenue Procedure 99-49 (found in Bulletin No. 1999-52)if you want to drown yourself in details.