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yer wrong phil. a section 475 election, like dealers or market makers
make, allow them to write off unlimited losses greater than $3000, but
they have to treat all income as ordinary (no 60/40 split) and pay
social security taxes on their profits. a section 475 election is NOT a
trader status filing.
but with trader status, you're still restricted to the $3,000 in losses
limit, but you get to deduct all your trading expenses on a schedule c,
treat all profits or losses as capital income, reportable on schedule
d, and pay no social security on the profits. also, losses greater than
$3,000 are carried forward on future returns until it's used up.
i've been using this setup for years and years(long before i even heard
of ted tesser) with the irs' approval. this deal is perfect for the
small trader who doesn't manage opm. but be careful when checking with
your accountant, because most are whimps where the irs is concerned.
TJ
--- Phil Lane <accumulator@xxxxxxxxxxxxxx> wrote:
> Trader status is great if you have short-term losses in excess of
> $3000 and
> you'd like to use them against other income.
>
> However, just in case somebody actually MAKES MONEY trading, trader
> status
> will cause all your trading income to be taxed at the VERY HIGH
> short-term
> rate - you lose the 60/40 split. And also once having elected trader
> status
> you can't go back again without a major hassle!
>
> This is my understanding - pls correct me if I'm wrong..
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