I'm not a CPA or a tax professional, so please don't PM me with tax-related questions. That said, I'm posting some IRS publications that relate to traders specifically. They may help answer the questions regarding trader status, mark-to-market election, and income and expense reporting. These links are good places to start: Topic 429 - Traders in Securities (Information for Form 1040 Filers) http://www.irs.gov/taxtopics/page/0,,id=105556,00.html IRS Day Trader FAQ (note the IRS can't even spell correctly) http://www.irs.gov/faqs/page/0,,id=15846,00.html
Publication 550 - Investment Income and Expenses Page 68 contains special rules for securities traders. http://www.irs.gov/pub/irs-pdf/p550.pdf
You will sometimes be asked to refer to Revenue Procedures 99-17 and 99-49 for additional information. Here are the links (these were a bitch to find.) http://www.irs.gov/pub/irs-irbs/irb99-07.pdf http://www.irs.gov/pub/irs-irbs/irb99-52.pdf
Used to change method of accounting for securities: http://www.irs.gov/pub/irs-pdf/i3115.pdf http://www.irs.gov/pub/irs-fill/f3115.pdf
For traders who have elected mark-to-market: http://www.irs.gov/pub/irs-pdf/i4797.pdf http://www.irs.gov/pub/irs-fill/f4797.pdf