As much as I hate to admit it, I have totally sucked at trying to make a living at trading... but I haven't given up yet. My question is this. If you had an overall loss for the year, would it be of any benefit, (possibly in a future tax year), to go ahead and do all the schedule C stuff and list expenses and the like, even though you can't deduct expense when your overall year was a loss. In other words, if I go ahead and fill out all the forms, would I be able to carry forward those expense to later years like I would carry forward any losses greater than the max of 3k. Thanks
yes if you qualify as a trader you would be able to carry forward a larger loss for use in future years. if you dont qualify as a trader you wouldnt gain anything.
By qualifying as a trader, I assume you mean by the fact that I have traded continually in an attempt to earn my living. I trade every day, all day. My wife has a separate job, but all of my time is spent in the endeavor of trying to make this my career, (I just have not yet turned the corner to profitability). Is that what you meant or is there some other qualification that you are referring to. Now when you say "carry forward a larger loss", are you indicating that this years expenses, such as software fees, trading seminar expenses, books, ISP charges, etc., could be carry forward to future, (hopefully, profitable) years; and if so, where can I read about the rules concerning this? Thanks for your help.
i think he's referring to whether you filed as a trader or not. i think this is something you are supposed to do BEFORE the current tax year. well, i'm not a US tax payer, so i don't know all the details. do a search in the self employment section, or check out greencompany.com lotsa good info there.
I saw this subject discussed a couple of months ago in a different forum.One person seemed to have personal experience and he claimed that CAPITAL losses can be carried over to following years and used to offset CAPITAL gains and you do not need to be recognised by the IRS as a trader,ie,that this applies to all investors.
I am pretty sure that you need to elect Mark To Market (MTM) accounting in order to carry foward losses. There is plenty of info on the net regarding this subject.
I see mark to market as a convenient way for traders to account for their trading.I dont see how the IRS could legally give further advantages to MTM traders and deny those advantages to other trader/investors.
I am not an accountant but for sure you may carry forward capital losses of any amount to offset future capital i.e. trading gains. The 3k limit is only against earned income. You do not need trader status to match trading losses against future trading profits. Trader status will allow you to use those losses against earned income on a 1-1 basis. Expenses as far as I know can be carried forward no problemo. Those are normal business losses.
RAH2153, Here's some info for you. http://www.fairmark.com/capgain/wstrader.htm Once you make the Mark to Market election you cannot go back unless you get consent from the IRS. Note: I never tried it so below is as much a question as a statement. Not sure if I'm correct here, maybe others will be kind enough to correct me if I'm wrong, but any profits are then treated as income rather than capital gains. Being that you claim self employment, any profits could be subject to business tax soc sec deductions.