"Lee Stewart" <Lstew62[at]hotmail.com> wrote:
- quote -

This is the main reason I don't have anyone on
mark-to-market. They all went out and generated huge losses
without consulting me first. Then we were stuck with
carryover losses that would seldom be used (e.g. section
1231 gains would sometimes use them up).

---
Drew Edmundson, CPA
Cary, NC

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"Lee Stewart" <Lstew62[at]hotmail.com> wrote:

- quote -

Well, that was poorly worded. Should have said that he
would never generate capital gains which could be used to
offset the capital losses he has incurred.

I know this seems obvious, but I have known preparers who
helped their clients get set up to report trades using
mark-to-market, without considering their carry-over losses.

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"L K Williams" <lanny[at]loxinfo.co.th> wrote:

- quote -

One thing to consider: You mentioned that your client has a
large loss carryover. If he decides to elect to use the
mark-to-market method of reporting he would never generate
capital gains which he could use to increase his carried
over losses in a given year. This is because under the
mark-to-market method all gains and losses are ordinary
rather than capital in nature.

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K Williams <lanny[at]loxinfo.co.th> wrote:

- quote -

The trades don't go on Schedule C. The trades are typically
reported on Schedule D unless the mark-to-market election
has been made (see Section 475). Then they go on Form 4797.

- quote -

The mark-to-market election is not required to be considered
a trader. However it is probably what your client wants.
Unfortunately the deadline for electing mark-to-market for
2006 is the due date of the 2005 return, without extensions.
Being a trader and reporting on Schedule D still has the
advantage of moving the trading expenses from Schedule A to
Schedule C.

- quote -

Two web sites that provide some details:

http://www.fairmark.com/traders/index.htm

http://www.traderstatus.com/

I also have an brief article and some cases on my web site:

http://www.nccpa.com/daytrader/day_traders.htm

---
Drew Edmundson, CPA
Cary, NC

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I have a client who has asked about filing his taxes as a
professional trader. I am wondering if anyong in this group
has experience with such?

My client has a substantial settlement with a major US bank
that is reported on W-2s each year (mid 5 figures.) He is
an active trader but has substantial losses over the last
few years. Thus, he has a very large loss carryforward. He
is asking about the advantages of being able to claim these
losses on Schedule C.

I understand the rule that he must mark the portfolio to
market at the end of each year. What I don't know is what
other requirements he would have to meet and what the
relative advantages and disadvantages might be.

Anyone with any comments?

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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