Trading Broker fees/Tax/Washsale/Please advice.......

[cstfx]

Another usefull lionk on Mark-To-Market accounting. Fromwhat I have read so far, you have to declare it prior to 4/16/20** of the tax year for which it applies - in other words it is too late to elect it for this tax yr 2010.

http://www.traderstatus.com/mark2mkt-features.htm

For anyone who trades different assets, do you lose 60/40 treatment on futures and forex if you elect M2M to handle those pesky wash sale stock restrictions?

fishtrader - you definitely need an accountant who deals with traders needs as opposed to a generic accountant. Tqax law is so complicated that you can be led astray by someone who doesn't know the tax code well. Green is one alternative, but there are many others too depending on where you are located.

 

[Scataphagos]

Quote from fishtrader:

"...Anybody have any advice????????

Simple rules of thumb...

1. If you have losses which could potentially be disallowed due to wash sale rules, just don't trade any stocks for the last 30 days of the year.

2. As long as your final trade of the year in that stock is a winner (even if only for $.01), wash sale losses are negated... as you get to add your losses from prior trades to the cost basis of future trades. Also... let's say you've got a big string of losers and are concerned about wash sale rules not allowing you to take the losses for this tax year..... and it's December. So long as you have ONE trade in December... say, Dec. 15, which is a winner... and the size of the trade is enough account for all of your wash sale losses, all of the losses before that trade will be allowed for this year. If you go back to a big string of losses again, the only wash sale losses you need to be concerned about are the ones which occurred after Dec 15.

The concept of Wash Sale is stupid, arcane, cumbersome and costly to comply with. For nearly everybody, they even have virtually no impact on your yet worth... they might, however, impact gains/losses and the taxes thereon by one tax year.

A lot of inconvenience for some for no overall consequence. The Wash Sale laws should be repealed.

 

[sprstpd]

Quote from cstfx:

For anyone who trades different assets, do you lose 60/40 treatment on futures and forex if you elect M2M to handle those pesky wash sale stock restrictions?

You can declare M2M just for securities trading to avoid this problem.

From:

http://www.greencompany.com/EducationCenter/GTTRecTaxTreatmentTraders.shtml

it says:

If you elect MTM, do you automatically lose the more beneficial 60/40 treatment on commodities and futures? No, this is another misconception. Be careful to elect MTM on securities only.

 

[sprstpd]

Quote from Scataphagos:

A lot of inconvenience for some for no overall consequence. The Wash Sale laws should be repealed.

Agreed but the tax man needs more revenue!

 

[Scataphagos]

Quote from sprstpd:

Agreed but the tax man needs more revenue!

Of course, always that. But Wash Sale disallowances don't provide more tax revenue... at best they merely shift the tax from one year to the next.

 

[sprstpd]

Quote from Scataphagos:

Of course, always that. But Wash Sale disallowances don't provide more tax revenue... at best they merely shift the tax from one year to the next.

Interest!

 

[Bob111]

Quote from fishtrader:

It's like, if I don't keep track on my trades on a daily basis then it'll be very very very confusing at the end of the week.

Bob111 or any of you please advice anything you have from your experience.

dunno about other brokers,but if you are with IB-they will calculate those wash sales for you. it will be on your tax forms.you can do it yourself,there a couple software apps for that(not cheap). i don't trade like you do,but last year wash sale cost me couple extra grands in taxes..still-'m not planning to elect MTM and trader status(even if i'm perfect candidate for it) mainly due to a: more tax work,job must be done by pro,who specialize on it(and they cost A LOT),
b:-complications to remove this status,once you done with trading.

 

[Bob111]

yeah..this wash sale rule should abolished long time ago..just another piece of food for leeches like IRS,tax lawyers and accountants..

 

[Free Thinker]

Quote from fishtrader:

Just wanna share another topic on my experience.

During the last 2 weeks I traded BAC for 80 trades (both enter and exit). I made a total of

Wins $5880
Lost $2160

Overall I made $3720

My Commissions on bundled with IB was $1200
(80 trades x 3000 shares per trade (comm = 0.005))

So I ended up making $3720 - $1200 = $2520

I'm thinking at the end of the year (only for these 80 trades that I made) because of the wash sale rule. I would have to pay tax on my gains which is

Gained $5880 x 35%tax = $2058

So I will be making only

$2520 - $2058 = $462 ????????????????

People tell my to consult with my Account. Which I did already.

All the commissions/tax really bothers me.

I did all the consultant with my account already.

That is i'm subject to the wash sale rule. I do make many points on my trading but this wash sale really kills me.

I'm wondering all you traders here posting your gains making $50,000 - $70,000 ytd but how about your wash sale tax???

You will all be eat up. It's really simple. I did let my accountant elect me as a MTM but i'm still not qualified as a day trader. I need to proof more another year. Well, another year is a lot for all of my money to be burned by this stupid wash sale rule!!!

For my commissions, I think I will chg from IB to another broker - a flat fee commission. Maybe MBT or OEConey which I do have a small amount of money with MBT but I don't really like their execution but have no choice. I've calculate the fees on unbundled for IB already, the exchange fees still hurts me a lot.

Anybody have any advice????????

if at the end of the year all of your trades combined in bac are profitable the wash sale will have no effect on your income or tax due. wash sales rules are only concerned with shifting losses.
the paperwork can be a pia though and i agree it should be abolished.

 

[fishtrader]

Still confused.

Ok lets make it plain and simple.

Let's say for the whole year of 2010.

I trade BAC for hundreds of trades,
I made money on my wins = $100,000.

I lose money on my loses = $40,000.

So I finally made a profit = $60,000.
(forget about the commissions)

So do I pay tax based on the $100,000 that i win (wash sale rule)?

Or do I pay tax on my profit $60,000???

Just make it simple. forget about the forms and and all the complicate stuff.

Does the wash sale apply to me? If it doesn't then why have the MTM for? Why should I care about it?

But if the wash sale rule applies to me, then this whole thing is absurd. Because I wasn't qualified for the MTM for 2010.

Plz advice......