Trader tax laws...what are they?

[Carroll Slemaker <cslemaker1@xxxxxxxx>]

There is an excellent book available on this specific subject:  "The
Trader's Tax Survival Guide" by Ted Tesser, a CPA, a trader, and (I
believe) an ex-IRS agent.

Now for a couple of corrections.

Traders (dealers, yes;  traders, no) may NOT setup Keogh or IRA plans
based solely on trading profits because those plans require income
either from an employer or derived from the sale of a product or service
(I forget what the technical term is for this type of income).  Likewise
for the deduction of medical-insurance premiums as a business expense. 
(I believe that tax regulations expressly exclude capital gains as
"income" for these specific purposes.)

Although traders should complete a Schedule C, trading profits should be
shown on Schedule D, not C - Schedule C will show only the trading
expenses (and, therefore, will show a "loss").  It is probably wise to
include an attachment which states that profits of the trading "busines"
have been shown on Schedule C - I always do.

Two advantages of the use of D are (1) the special Schedule-D tax
calculation and the 20% cap on the tax rate, and (2) no self-employment
tax.

Carroll Slemaker