Do I qualify for Trader status?

lindq · Dec 18, 2007

Quote from monstercat:

absolutely no. you must day trade basically every day to qualify for trader status

Baloney. Not true at all. Has nothing to do with daytrading.

Pekelo · Dec 18, 2007

Quote from AshanD:

-I do not day trade. I position trade with the timeframe of 1-15 days (most often 2-10 days)

I would say that in the eye of the IRS you are not a trader, but a short term investor even if anything else applies. It doesn't matter what your trading vehicle is.

But hey, your first audit will tell you for sure!

I agree with Jack, $250 is worths it to sleep well....

nkhoi · Dec 18, 2007

Quote from AshanD:

-I trade 1256 contracts exclusively

-Trading is my sole income source

-I do not day trade. I position trade with the timeframe of 1-15 days (most often 2-10 days)

For tax purposes can I be considered a trader?

absolutely and if you still worry about the 'day' in day trading bit , scalp 1 contract ym randomly for 5m each day should do it. just do what they ask in print and you will be fine.

AshanD · Dec 18, 2007

I checked the greencompany website and found this:

We do not recommend IRC 475(f)(2) elections for commodities traders: Profitable commodities traders would lose the long-term capital gains rate tax advantage mentioned above. If you lose significant money trading commodities before April 15, 2002, and wish to exit the business, then elect IRC 475(f)(2) in order to receive ordinary loss treatment. You will need it.

The IRC 475F2 election is the trader status. So that settles it, I would be better off filing as an investor.

yip1997 · Dec 18, 2007

Quote from AshanD:

-I trade 1256 contracts exclusively

-Trading is my sole income source

-I do not day trade. I position trade with the timeframe of 1-15 days (most often 2-10 days)

For tax purposes can I be considered a trader?

1256 contracts is MTM. Why do you want to qualify as a trader? To take a bigger loss than 3K?

yip1997 · Dec 18, 2007

Quote from AshanD:

I checked the greencompany website and found this:

The IRC 475F2 election is the trader status. So that settles it, I would be better off filing as an investor.

Exactly. It is better not to elect trader status if you make money trading 1256 contracts.

opt789 · Dec 18, 2007

You are confusing two different things.

You can claim Trader status and not claim mark to market as a 1256 trader in order to deduct your expenses on schedule C. You are quoting something that says not to choose mark to market, it does not say don't choose trader status.

nkhoi · Dec 18, 2007

Mark-to-Market accounting: The new trader tax laws of 1997 are IRC Section 475(f); these allow Traders in Securities (475(f)(1)) and Traders in Commodities (475(f)(2) to elect mark-to-market accounting by April 15 of the current tax year (not after the year ends). The main effect of this new tax law is to convert capital gains and losses into ordinary gains and losses.

so you say trader status but what you really mean is MM status. And evrybody else seems to understood what you mean except me, hm...

more...

http://www.fool.com/taxes/2000/taxes000609.htm

bathrobe · Dec 18, 2007

http://www.tradersaccounting.com/news_detail.php?newsid=43

JackR · Dec 18, 2007

Ashan you have a number of things to consider -

If you are currently young, healthy, and single you have probably not thought much about medical insurance.

If you marry and have children, medical insurance might be nice unless your spouse has insurance or you are a VERY successful trader. You will not believe what maternity bills amount to.

A tax-sheltered, deductible, retirement plan might be nice.

These are only feasible/deductible through some "entity", not via trader status.

None of these have to do with "trader" tax status. However, if you plan to trade for a living for a long time these things will become more important. But, if you just plan to trade for a few years they mean little. However, depending on how successful you are, you may trade until ready to retire. Again, go to Green or some other CPA type that specializes in traders and the trading business. Most CPA's don't have any idea what a 1256 contract is, what trader status is, etc., etc. You need to deal with a specialist.

Jack