Question for Mark to Market Traders

M

midlifeguy

Do you write off your expenses on Schedule C?
The IRS instructions on this are so confusing that I can see why there are so many differing opinions...

Based on the instructions:
You put your gains and or losses on Form 4797 including unclosed positions on 12/31.
You write off your expenses on Schedule C.

Anyone doing this? Any IRS problems? I assume you can thus avoid writing every single trade into a Schedule D.

This is the way I see it.
 
Quote from midlifeguy:I assume you can thus avoid writing every single trade into a Schedule D.
More...
You have some lingering confusion. True one may write every single trade into a Schedule D. One does this if he is a regular investor or if he is a trader. OPTIONALLY one who is a trader may choose to formally elect, in writing, to use the M2M method and if so, then rather than write every single trade into a Schedule D the exact SAME INFORMATION is put on form 4797. Plus if there happens to be open positions at December 31st those also go on the form 4797.

The actual election of M2M doe not change the reporting obligation all that much. It merely moves the reporting from schedule D to form 4797 (plus the aforementioned open positions)

Also M2M means the wash sale computation one might have been putting on Schedule D - are no longer performed.

There are also some transition rules if the trader changes from Sch D to form 4797.
 
But, you can write off you expenses on Schedule C?
So, you would show no income on Schedule C, just a loss? That is the way I read it.
 
Quote from midlifeguy:

But, you can write off you expenses on Schedule C?
So, you would show no income on Schedule C, just a loss? That is the way I read it.
More...

Yes, this is the way I did it the last 5 years. No problems. But have you elected, officially to M2M through the IRS?
 
Quote from midlifeguy:But, you can write off you expenses on Schedule C?
So, you would show no income on Schedule C, just a loss? That is the way I read it.
More...
Expenses on Schedule C has absolutely no bearing on whether you use Schedule D or Form 4797.

Traders with Trader Status use Schedule C

Investors use Schedule A

With a few minor details, it is as straight forward as that.
 
What is form 4797?


Schedule C would show your trading income, after loss, brokerage expenses etc etc off of your statement.

Then on C you would itemize expenses such as cable, data feed, publications, office rent/expenses and other trading expenses one can get away with, LOL

No different than operating a shoe store..???

Income minus expenses equal taxable income on business...

I think this is correct basically....

SteveD
 
trader status i know you do some traders taxes. please tell me of one very heavy full time trading client were they asked for every trade itemization? i've been using green for many years and i've asked them many times and they've not had one to my knowledge. the irs changed nothing but just pointed to what the rules are. the law was always to show every single trade but few huge vol traders ever did it.. the irs has no interest in seeing every trade for huge vol gys. they can easily audit your monthly statments to check balances. the irs is just saying this to make sure theres no abuse from part time traders doing sch c's. but if you trade 10's of thosuands of trades a year you're a fool to list every one
 
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