taxes for traders

Discussion in 'Taxes and Accounting' started by Moreagr, Feb 25, 2006.

  1. Moreagr


    I need some advise on taxes for the year 2005 i have over 1k trades with many wash sales.. which is the best recommendation as far a filing for trader status.

    I have read about mark to market elections is this what i need and which form do i need to fill out?

  2. Assuming that you are one person, filing taxes solo as an individual, using form 1040 for 2005, and as such you also had a requirement to file a form 1040 for 2004, then if you wanted M2M for 2005 you had to file the election by April 15, 2005.

    Wash sales are not necessarily the end of the world...

    You may elect M2M for 2006, if you file the election by April 15, 2006.

    If you had any other situation other than the above, different rules might apply.
  3. You could visit

    You could find there a lot of information about "trader status", which is the best thing you could do. There are no wash sale rule for "traders" and many other benefits.

    There are too many conditions for me to elaborate here
  4. Not really..
    The tax treatment of sales of securities held in connection with a trading business depends on whether a trader has previously made an election under section 475(f) to use the mark-to-market method of accounting. If the mark-to-market election was not made, then the gains and losses from sales of securities are treated as capital gains and losses that must be reported on Form 1040, Schedule D. Both the limitations on capital losses and the wash sale rules continue to apply

  5. You're absolutely correct. My appologies!
  6. but either way the trading related expenses go on a Schedule C? Eventhough "business income" is not reported on a schedule c.. but only capital gains/losses???

    so I guess you would put "Zero" for business income.. but list the expenses on the schedule?
  7. What is the best tax software out there for active traders?
  8. I always used
  9. nkhoi

    nkhoi Moderator

    has rule change, I thought "You may elect M2M for 2006, if you file the election by April 15, 2005.
  10. nkhoi, The law was passed in 1997 and the IRS rules were made I believe in 1999. The M2M rules are easy on the surface, but quite complex when you get into the fine points. In no event (to my memory) have the rules for traders ever been so onerous that a taxpayer had the elect by giving as much advance notice as you suggest above.
    #10     Mar 6, 2006