Mark-to-Market

R

RAY

2 Questions;

This is my first year of M-t-M. I am going to have my return professionally done, but I still like to do it my-self to "check", and this will be my accountants first return that is M-t-M. He is good, but does not have ESP.

1. Were do you realize the interest earned on accounts designated as "trading" or "M-t-M." I am thinking it must be included on form 4797 (with the Cost basis, plus other improvements section), or some where on schedule C (other income, including Federal and state gasoline or...).? Maybe the interest from the mark-to-market accounts is just included with other interest?


2. Those that are M-t-M. Do you even include your trades that were for your trading business on a scedule D (being that the gain or loss is not a capital gain or loss)? Or, do you just list all trades and include it with the schedule C (this is what I am assuming)? If you do include with schedule D; how do you present it? I would "think (yes real thought!)" that you could just list the trades without a full Gain or loss for each one (no wash sale etc.).

Thank you so much.

I looked at my post and I mispelled "Interest" 3 times! I need a vacation!
 
Ray; interest earned goes on schedule B along with interest earned anywhere else. It is "ordinary" income not "capital".

You can report you trades in "aggregate" on schedule D and then reverse them off schedule D and onto schedule C. This makes them "ordinary" rather than "capital". There are also specific notes and references that must accompany these procedures. You must also file form 3117 "Application for Change of Accounting Method" as well as a section 481 adjustment in certain instances.

Let me be real clear here: I'm not an accountant, attorney, or any kind of tax expert by any stretch of the imagination. I have prepared my own stuff for years but now take it only so far and then send it to the CPA. Your accountant may be very competent but if he has not done this type of thing before I would urge you to use someone who has. It's not rocket science but it is complex. The devil is in the details and these laws/ IRS regs are new and may not be familiar to all accountants.

One last caution. When your trade totals end up on schedule C a program such as TurboTax wants to also extend those gains to schedule SE. This is incorrect. This particular schedule C may not be "netted" against other schedule C totals if you have any and these gains are not subject to self-employment tax.
 
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