If I have/had no open positions at the end of the year does MTM benefit me in any way? From what I am reading it only deals with positions that are open at the end of the year...so if I sell out of my positions almost daily or weekly how would it help? Am I misunderstanding something? Appreciate any help!!! Thx
MTM Accounting
- Thread starter Coderblix
- Start date
Are you talking about US equities, as a US citizen or resident?
If so, it probably won't make a difference, THIS YEAR, unless you have wash sales, which can jump into the next year even if you have no position at all on Dec 31. For FUTURE YEARS in which you have losses, it may make a difference, as there are "NOL carrybacks", so you aren't limited to writing off just the $3000 capital gains limit, etc.
There are many issues with switching to MTM, both positive and negative; the only way you'll get it figured out is by doing a lot of reading yourself, or by hiring an accountant who has expertise in this area (such as Robert Green, who posts here occasionally).
In any event, it's been my observation that EliteTrader is a horrible place for tax advice, so I'd rely on legitimate, outside sources for this type of info, rather than any posts by non-accountants (including this one).
If so, it probably won't make a difference, THIS YEAR, unless you have wash sales, which can jump into the next year even if you have no position at all on Dec 31. For FUTURE YEARS in which you have losses, it may make a difference, as there are "NOL carrybacks", so you aren't limited to writing off just the $3000 capital gains limit, etc.
There are many issues with switching to MTM, both positive and negative; the only way you'll get it figured out is by doing a lot of reading yourself, or by hiring an accountant who has expertise in this area (such as Robert Green, who posts here occasionally).
In any event, it's been my observation that EliteTrader is a horrible place for tax advice, so I'd rely on legitimate, outside sources for this type of info, rather than any posts by non-accountants (including this one).
Thanks for the reply. I purchased the tax guide on Mr Green's website (waiting on the hardcopy) and also met with my CPA - considering a Green consult as well. I was hoping that my"MTM losses" would offset tax liability but seems my CPA is thinking that the losses only reduce my AGI and they cannot be used to offset other tax liability. I have a 25K personal tax bill coming due and hoped that the losses I incurred through my trading entity in 2013 would offset the 25K dollar for dollar....but if the MTM losses only reduce my AGI then there isn't a huge benefit...
Thanks Robert. I think I was misunderstanding some basics. For example (using some made up numbers for clarity) if I made 100K in 2013 and was in a 30% tax bracket and had no withholding I would owe 30K in taxes. If in the same year had a LLC with MTM and lost 20K that would reduce my "earnings" to 80K and if I stayed in the same tax bracket I would now owe 30% of 80K instead of 30% of 100K. So 24K vs 30K so the loss saved me 6K in taxes. Understand this is overly simplified but am I thinking about it correctly now? My miss was in thinking that in the scenario above that I would offset the 30K in taxes owed directly with the loss...so I would owe 10K vs 30K. Thanks again!
Yes, you got it right. With Section 475 MTM and trader tax status, you get unlimited business loss treatment. If you have wage income of 80k and lose 50k trading securities with 475, your gross income is 30k. You aren't stuck with the puny $3,000 capital loss limitation which would mean gross income of 77k. We cover trader tax status and Section 475 on our Webinar Oct 1. http://www.greentradertax.com/events/trader-tax-status/