Tax Law Advocacy for Traders

GreenTraderTax.com is working on changing laws to allow retroactive application of MTM accounting and other tax law changes for traders. They are asking traders to take 15 minutes to send e-mails to Congress. The more e-mails we send, the more likely they are to listen.

From the site:

"Over the last few years, Congress has passed many new laws that are quite beneficial to traders. Unfortunately, the IRS has done a poor job in translating those new laws into IRS tax code, regulations and revenues procedures. As a result, many traders have been unfairly penalized."

http://www.greencompany.com/advocacyfortradertax.htm

-- Dave

 

i think that's great.

 

Internal Revenue Service Commissioner
Charles O. Rossotti
1111 Constitution Ave NW
Washington, DC 20224

Re: Trader Tax Relief & Corrections

Commissioner Rossotti:

Over the last few years, Congress has passed many new laws that are quite beneficial to traders – i.e., those who make part of all of their income trading securities and/or commodities. Unfortunately, the IRS has done a poor job in translating those new laws into IRS tax code, regulations and revenues procedures. As a result, many traders have been unfairly penalized.

Not only has the IRS "sold traders short" on delivering what Congress intended (i.e., ordinary loss treatment for ALL traders), it has also increased the number of audits it performs on traders, and it is acting with impunity.

In 1997, Congress passed new tax laws granting traders the ability to treat their trading gains and losses as “ordinary.” Ordinary gains and losses, for tax purposes, are far superior to capital gains and losses. This is the same tax treatment already enjoyed by those who qualify as “dealers” in securities and/or commodities (under Internal Revenue Code Section 475 – mark to market accounting). However, traders who wished to take advantage of these helpful laws had to “elect” this treatment, by April 15 of the current tax year, in a statement to the IRS.

Unfortunately, it has been far too difficult for the majority of traders to do this on time, as the IRS guidelines are vague, confusing and often not updated in time to reflect new information. The unacceptable result is that a large number of traders are now facing bankruptcy because they are prevented from receiving beneficial “Net Operating Loss" refunds – refunds they are entitled to according to the laws passed by Congress.

Equally unfair is that many traders incurred these large losses in corrupt financial markets. Traders cannot deduct their real business losses, yet these perpetrators of financial market crimes get away with deducting phony losses on their ill gotten gains.

We have confidence that the perpetrators of these financial crimes will not continue to get away with them, even with their powerful lobbies in Washington. We are equally hopeful that Congress will do what is right for traders – simply, that it will hold the IRS accountable to fix what has been messed up in translating Congress’s existing legislation.

Our dynamically growing community of traders, including "day traders" and "online traders," currently number in the millions. We are spread out evenly across the nation, and we are equally represented in all demographic groups, genders, races and political beliefs. We are highly educated, have money and are actively involved in social issues, politics, voting and the economy.

We don't have a lobby in Washington to represent our interests, which could be why we are in this current predicament. In an attempt to catch up on lost time, we are using a "virtual advocacy campaign" to reach members of Congress, the media and our community. Please accept our Internet methods. As traders, we make our living over the Internet – more so than any other community in America. Please don't consider our messages to you "cyber attacks." Rather, think of them as “cyber appeals.”

To learn more about our specific appeal, kindly visit www.greencompany.com/advocacyfortradertax.htm. It will take just 15 minutes of your time to read our “cause and mission” and "desired tax law changes."

We very much hope that your office will contact this group in the near future in an attempt to begin fixing our problems. We can be reached via e mail at advocacy@greencompany.com or by calling (212) 658 9502 (voice mail).

Thank you for your help.

Sincerely,

_______________________

cc:

Sen. Kent Conrad (D-ND), Chair, Senate Taxation and IRS Oversight Committee
Sen. Don Nickles (R-OK), Rnk. Mem., Senate Taxation and IRS Oversight Committee
Sen. Max Baucus (D-MT), Chair, Senate Finance Committee.
Sen. Charles Grassley (R-IA), Rnk. Mem., Senate Finance Committee.
Sen. Christopher Dodd (D-CT), Chair, Securities and Investment Committee
Sen. Michael Enzi (R-WY), Rnk. Mem., Securities and Investment Committee
Sen. John Kerry (D-MA), Chair, Small Business and Entrepreneurship Committee
Sen. Christopher Bond (R-MO), Rnk. Mem., Small Business and Entrepreneurship Committee
Rep. William Thomas (R-CA 21st), Chair, Joint Committee on Taxation
Rep. Charles Rangel (D-NY 15th), Rnk. Mem., Ways & Means, Joint Committee of Taxation
Rep. Michael Oxley (R-OH 4th), Chair, House Financial Services Committee
Rep. John LaFalce (D-NY 29th), Rnk. Mem., House Financial Services Committee
Rep. Donald Manzullo (R-IL 16th), Chair, House Small Business Committee.
Rep. Nydia Velazquez (D-NY 12th), Rnk. Mem., House Small Business Committee

 

While I'm sure your intentions are all well and good, I'm a little baffled by your letter. Isn't -9100 relief available here?

 

Ok, I see where you are going with this.

9100 relief IS available for taxpayers that missed making their mark-to-market election. It's just that to date, no trader has been able to put together a fact pattern that meets the requirements under 9100.

I'm curious as to whether the taxpayers and/or their advisors that failed to get relief just botched the process (i.e. they didn't develop their fact patterns properly) or whether the Service thinks that traders benefit too much from hindsight with this election.

In the event that a trader has missed the election, and can't afford the costs of a PLR, I think your LLC idea is a great alternative.

 

True enough. I was simply making the observation that for "damage control" purposes using a disregarded entity makes sense. I'm quite clear on the fact that the technique has no retroactive effect.

Moving on...

We both agree that the lack of -9100 precedent in this area is troubling. Maybe we can lend some insight to others that may be considering a PLR by discussing some of the hazards.