TAXMAMA.COM
Published by Eva Rosenberg, MBA, EA
FILING AS AN INVESTOR, TRADER, or MARK-TO-MARKET TRADER
Advantages, Disadvantages, and Reporting Requirements Summary

Investor Trader Mark-To-Market Trader
Anyone qualifies Special rules Special rules plus positive election / IRS approval needed to reverse
Gains are capital
LTCG rates available		 Gains are STCG
taxed at ordinary rates
Segregate LT holdings		 Gains are STCG
taxed at ordinary rates
Segregate LT holdings
Losses limited to $3K/yr Losses limited to $3K/yr Unlimited losses allowed
Potential NOL treatment
No SE tax No SE tax No SE tax
Expenses go to Sch A
Limited by 2% AGI & 
Income phaseout rules		 Expenses go to Sch C
Unlimited deductibility		 Expenses go to Sch C
Unlimited deductibility
Margin Interest limited
by Form 4952 & Sch A		 Margin interest on Sch C Margin interest on Sch C
No office-in-home May be office-in-home May be office-in-home
Wash sale rules apply Wash sale rules apply No wash sale rules apply

Reporting:
Transactions on Sch D Transactions on Sch D Transactions on Form 4797, Part II, Line 10 (Ordinary Income & Loss)
Expenses on Sch A Expenses on Sch C
Attach explanation		 Expenses on Sch C
Attach explanation
No special elections No special elections Affirmative election required in the Year previous to effective year. Form 3115 also required (no fee). Automatic approval, but IRS permission required to change.
Resources:
CFS Income Tax 1996 to 2000 Research CD-Rom
CCH Federal Tax Service
BNA Portfolio Plus
"Tax Tips for Day Traders" by Bill Bischoff, bbischoff@smartmoney.com
Tax Guide for Traders, Kaye A Thomas, Fairmark Press Inc, www.fairmark.com
Form 4797 Instructions (2000), Curt Freeman, Tax Forms Development Branch
Copyright © 2001,  NANCY E GOEDECKE, EA   Reprinted with permission.
If you want to copy or reprint this article, please contact Nancy Goedecke
About the author: NANCY E GOEDECKE, EA

Nancy E Goedecke, EA is a full-time practicing Enrolled Agent specializing in individual and small business taxation. She is an experienced teacher and a frequent presenter of income tax seminars for professionals across the country. Nancy is known for her ability to make comprehensive tax issues understandable and applicable in daily practice of attendees. Nancy became an EA and joined NAEA in 1986, is a Fellow of the National Tax Practice Institute and currently serves as Secretary of NAEA. She is also a member of the Internal Revenue Service Advisory Council (IRSAC) which meets at the national office of IRS with Commissioner Rossotti and his staff. Nancy is a Past President of the Massachusetts Society of Enrolled Agents and recipient of the 1989 "Enrolled Agent of the Year" award. As owner of Taxes & Money Management in Hudson, MA, Nancy is also a Registered Representative/Advisory Representative orchestrating comprehensive financial solutions to her clients.