To qualify for "Mark to Market" Daytrader status...?

Bugsy

Bugsy

Does it require you to buy in and sell out of a position daily, or that you just need to be trading positions daily? As in, I trade futures, and it makes sense sometimes to hold my ES contracts for the 1 hour close into the new trading status and continue to add to that position depending on market conditions.

I mean, I could sell out of the contracts and buy right back in an hour later, but that seems redundant and wasteful in paying commissions. As stated, I would be ADDING TO positions, so there would be intraday trading still, I just might not sell out sometimes.

Can anyone offer clarity, and please, no opinions stated as though you are sure on what you think unless you are clarifying you are not sure and it is your opinion.

Thank you in advance.
 
Robert Morse said:
Futures are 1256 contracts with MTM accounting and no wash sales. What benefit would you get out of contacting the IRS for MTM accounting?
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I would have the option to switch between stocks and futures if I were under that status.
 
You need to qualify for Business tax status and then make an election of section 475 MTM.
So, it is possible if you trade very short term and a lot, with consistency, and try to make it as a business (accounting principles, obvious goal of making a living of it, etc.)

If you succeed, your investments could be also taxed short term, like all MTM trades. This is one of the reasons why a retail trader could have a small company to keep the short term trading MTM for stocks, as the company would be the short term trader. Then, the individual would keep its personal investments, long term.

Hope it makes sense to you.
 
Fonz said:
You need to qualify for Business tax status and then make an election of section 475 MTM.
So, it is possible if you trade very short term and a lot, with consistency, and try to make it as a business (accounting principles, obvious goal of making a living of it, etc.)

If you succeed, your investments could be also taxed short term, like all MTM trades. This is one of the reasons why a retail trader could have a small company to keep the short term trading MTM for stocks, as the company would be the short term trader. Then, the individual would keep its personal investments, long term.

Hope it makes sense to you.
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Or maybe set both up as separate LLCs under a single S Corp which would give me a lot more deductions. Was planning on talking with a CPA about that next year as you kind of touched on what I had been pondering. Thank you
 
Bugsy said:
Or maybe set both up as separate LLCs under a single S Corp which would give me a lot more deductions. Was planning on talking with a CPA about that next year as you kind of touched on what I had been pondering. Thank you
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Not accurate info. For more than 10 years, as an individual, I've been MTM for stock & stock options, but NOT for futures.
 
Q.E.D. said:
Not accurate info. For more than 10 years, as an individual, I've been MTM for stock & stock options, but NOT for futures.
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Absolutely right. You never want to ask MTM for futures, as you would lose your 60/40 and be taxed 100% short term.
This is why an MTM request should be done only for stocks (and stocks derivatives).

And in a way, Robert is also right as futures accounting are MTM. If you request MTM for futures that will be for tax purpose.
 
Q.E.D. said:
Not accurate info. For more than 10 years, as an individual, I've been MTM for stock & stock options, but NOT for futures.
More...

Fonz said:
Absolutely right. You never want to ask MTM for futures, as you would lose your 60/40 and be taxed 100% short term.
This is why an MTM request should be done only for stocks (and stocks derivatives).

And in a way, Robert is also right as futures accounting are MTM. If you request MTM for futures that will be for tax purpose.
More...

Interesting, I had no idea you're forced all one way or the other. I was under the impression Futures could only be taxed 60/40, and then stocks could be taxed according to your elected status. I suppose I could do separate LLCs for each and trade under the business entity in both. I think that would protect each tax status, but that feels a bit redundant. Probably just create one for futures and one for investments. Putting both under one corporation would probably be a good idea for deductions. Thank you for the information.
 
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