Discussion:Day trader losses
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Discussion Forum Index --> Advanced Tax Questions --> Day trader losses
Discussion Forum Index --> Tax Questions --> Day trader losses
| 22 September 2009 | |
| I think I know the way to handle this, but just to make sure:
I have a client that sold over $10 million in stocks in 2007 and had a $500K gain, in 2008 lost everyting, sold $80 million in stocks and had a loss of $750K. Everything is short-term. I know ordinarily, a person cannot carry back the losses to offset to 2007 gains, but do those same rules apply if they are a day trader and have no other income? | |
| 22 September 2009 | |
| if he elected the mark-to-market treatment, then he might have an NOL for 08, which could be carried back 2-5 years. Otherwise, no, he has a capital loss - carryforward only, and use up at $3,000 per year above gains. So if he lives another 250 years, he will recoup it, except for the time value of money. | |
Seaside CPA (talk|edits) said: | 22 September 2009 |
| If taxpayer is considered a "trader of securities", and if he has filed a mark-to-market election, I do not think he would have a capital loss limitation. (This would not be reported on Schedule D; reported elsewhere) If he is considered an "investor", he would be limited on losses, & sales would be shown on Schedule D. Check out IRS website for more detailed information on these terms; do a search for day trader. | |
Seaside CPA (talk|edits) said: | 22 September 2009 |
| Sorry, Kevin & I were posting at the same time. | |
| 22 September 2009 | |
| yes, and I noticed a mistake in my post: he will not recoup the original monies, he will just be able to deduct the losses on his taxes for the next 250 years. | |
| 22 September 2009 | |
| Look at the recent court cases related to daytrader. Last one I saw tp had over 300 trades and court determined they were not trader. Dollar volume is not necessarily a measure of day trader status. As in all good tax answers, it depends. | |
| September 22, 2009 | |
| Whether he was a trader is irrelevant unless he validly elected mark-to-market accounting. | |
| 23 September 2009 | |
| Take a look at 2007 tax return and see if Form 4797 is present and there is activity in Part ii. If so this would indicate he has made the election. The mark to market election has to be done prospectively. The election must be made by the original due date of the tax year prior to the year for which the election is to be effective . | |
| 23 September 2009 | |
| and, National Office will not give 9100 relief to make an election (they assume hindsite). | |
| 23 September 2009 | |
| The court case was related to his claim as a daytrader in order to qualify for the mark to market election. | |
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