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>
>With all due respect.
>
> I do recall the matter of a Trader and the issue of Social Security Tax
>being discussed last year on this list. Maybe we should all read the
>Fortune article and give this topic a rest. If anyone wants to pay the tax
>while claming Trader Status, I am sure that those of us who do claim Trader
>Status, and do not pay Social Security Tax, have no objection.
>
>The bottom line is... If you are unsure about this issue but want to claim
>Trader Status, please seek an expert to assist you. There are several
>sources.
>
I'd like to thank all who have contributed to this thread. I apologize if
this is driving people insane, but I've read the article and talked to a
number of CPAs about this but there still seems to be considerable
confusion. Here's what I've learned so far, (that is, what I believe to be
true):
1. There is NO self-employment tax on trading gains, as this is not
considered to be "earned income". Regardless of Trader status or the lack
thereof.
2. Trader status allows you to deduct all your expenses instead of having
to hit the 2% or whatever threshold.
3. Mark-to-market election allows you to put the trading gains/losses on
schedule C. In this case trading gains/losses are considered to be ordinary
income. And therefore a trading loss can be used to offset other income.
4. Here's the bad part, or at least the ambiguous part: When trading
futures short-term, when considering the gains to be Capital gains (no
mark-to-market election), they let you pretend that 60% of it was long-term
gains and it's taxed at a lower rate. HOWEVER, when using mark-to-market
and treating it as ordinary income, the whole thing is taxed at the full
"ordinary" rate.
I was hoping someone could just give me a simple TRUE or FALSE to each one
of these points. Well maybe a little explanation would be good, but my
brain is really full at the moment!
Once again I apologize to those who are growing weary of this topic. A
couple more weeks and it will all be over!
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