Wash Sale Nightmare

Discussion in 'Professional Trading' started by Arjun1, Apr 22, 2009.

  1. Arjun1


    How does a retail stock trader avoid the situation mentioned above without m2m election?

    I trade mostly futures. I've started trading some stocks. I'm not convinced m2m is the way to go because there are disadvantages - esp. for futures/forex traders.

  2. jprad


    Make sure you're flat the day before Thanksgiving and trade anything you've not traded for the previous 30 days until New Years.
  3. Hire a tax lawyer.
  4. "No capital loss carryover: Capital losses can only be offset by capital gains. If you are carrying forward a substantial capital loss, beware: by selecting MTM, your gains would be considered ordinary income moving forward, hence only $3,000 per year could be used to offset your capital loss."

    I don't think so. Under MTM, all of your losses can be taken against gains - not just $3K. Thus, if you lost $100K last year (carried over to this year) and you make $200K this year, your tax liability is on $100K. If you did not make the 475 election, then you can take only $3K of losses from the previous year until the NOL is exhausted.

    At least this is my understanding of the 475 election.
  5. I know a person who does just that.

    He trades SPY from Jan 2 to day before Thanksgiving.
    After Thanksgiving he trades QQQQ to Dec 31.
    He then goes back to trading SPY on Jan 2.

    It is an easy method for him and it works!!!!:)
  6. morgen


    According to what you said above, MTM is not a good choice. So another better way to avoid wash sale is not to repurchase same stock within 30 days. :)