Wash sale rule

Discussion in 'Professional Trading' started by BACKDOOR, Mar 26, 2006.



    I understand that this rule does not apply to futures traders, but
    my inquiry concerns stock and option trades. If one is a "pattern
    day trader " -in the eyes of the IRS- is there a exemption to the
    rule? If the answer is no, then i will have some follow-up questions later on.
    Thanks for the insight/REM
  2. The exemption is available to "traders in securities" (as opposed to a PDT). To avail yourself to the exemption you must elect M2M by the due date established by IRS Rev Procedure.

    If you type in "wash sale rule mark to market" w/o the quotation marks into Google the first three hits will tell you all you need to know about this area.
  3. Hi, Backdoor.

    Take note that pattern day trader (PDT) status has no significance at all in the context of taxes and the IRS. It's only relevant with respect to capital requirements, and being classified as a PDT by your broker will have no bearing on IRS's consideration of whether you qualify for active trader status (which is also separate from making the IRC 475 MTM election). You don't have to qualify for MTM, you just need to make the election by the tax filing deadline of the year for which you want MTM accounting to apply. To have it for 2005, you would have had to make the election by April 15, 2005.

    I hope that's helpful.