Re: trader status question

["Thomas Brun" <TDBRUNkkkkkkkkkkkkkkkkk>]

Phil,

I thought your question was a good question and I found nothing wrong with
your request.  I think it is a good idea to review this issue once a year
and I did receive some additional information from postings to your request.
I was just trying to ask  that facts, as best as we know them, or at least
sources be posted, rather than opinions.

Please accept my apology.  My comment was not directed towards you.

I think your coments below, except for  #3 are correct.

Regarding #3

I don't think that the schedule C removes the 60/40 treatment of Capital
gains for futures.  From my experience, Form 6781 flows into the schedule D
and then to the 1040.  Only the expense moves from the Schedule C to the
1040.  To be honest, my CPA was not happy about putting the expenses on the
Schedule C, but he did agree with me that it seemed to be the best place for
them.

There is a Mark to Market election that you can make and I think that
changes the Capital Gain income to ordinary income.  I think that is
something different to the specific question of trader status.  I don't
recall the exact detalis of that election.  I think it is something new.

Regards,

Tom Brun

-----Original Message-----
From: Phil Lane <accumulator@xxxxxxxxxxxxxx>
To: omega-list@xxxxxxxxxx <omega-list@xxxxxxxxxx>
Date: Thursday, April 01, 1999 9:36 AM
Subject: Re: trader status question


>>
>>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!
>
>
>
>
>