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> My quick take:
> No self-employment tax.
> Capital gains/losses treated as such. (not ordinary income)
Well - that's not really what the statute says (I did get a complete
copy of section 475 today). What it does talk about is the election to
mark to market. It doesn't say anything about the character of the gain
with respect to traders (although it does with respect with dealers) -
or anything about self-employment tax (best I can tell - reading the tax
code gives me headaches).
Whose comments are those that you've included in your message (below)?
If they're part of the official legislative history of the statute -
then they're of course very important in figuring out what the statute
means. If they come from Fortune Magazine - they don't have much weight
at all <g>.
By the way - if someone really is a professional trader (say - for
example - someone who's a floor trader) - how are his gains/losses
handled in the absence of an election to mark to market at the end of
the year? And - before this statute was enacted - what were the rules
about marking to market at the end of the year (now there's an option -
but - before this statute - was marking to market not an option - or was
it mandatory)? In figuring out what a legislative change means - it's
important to take into account exactly what the nature of the change was
- and what Congress was trying to do.
As little as I know about this subject - what I suspect Congress was
trying to do is to allow someone who really is in the business to close
out his books for accounting purposes at the end of the year. Nothing
more. Just a guess on my part. Robyn
> -----------------------
>
> Present and Prior Law
>
> Securities and commodities traders may elect application of
> the mark-to-market accounting rules. Gain or loss recognized by
> an electing taxpayer under these rules is treated as ordinary
> gain or loss.
> Under the Self-Employment Contributions Act (``SECA''), a
> tax is imposed on an individual's net earnings from self-
> employment (``NESE''). Gain or loss from the sale or exchange
> of a capital asset is excluded from NESE.
> A publicly-traded partnership generally is treated as a
> corporation for Federal tax purposes. An exception to this rule
> applies if 90 percent or more of the partnership's gross income
> consists of passive-type income, which includes gain from the
> sale or disposition of a capital asset.
>
> Explanation of Provision
>
> The provision clarifies that gain or loss of a securities
> or commodities trader that is treated as ordinary solely by
> reason of election of mark-to-market treatment is not treated
> as other than gain or loss from a capital asset for purposes of
> determining NESE for SECA tax purposes, determining whether the
> passive-type income exception to the publicly-traded
> partnership rules is met or for purposes of any other Code
> provision specified by the Treasury Department in regulations.
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