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Let me throw my 2 cents worth in here.
Quoting from Tesser's 1999 book: "There is no election on the tax return
that one would make to indicate that he or she is a trader." The status is
determined by case law. If you claim to be in the "business" of trading and
file a Schedule C showing your trading expenses, that constitutes a claim of
"trader status".
I believe that the 475 election (which IS an express election) relates to a
particular manner in which profits or losses may be handled, not to the
trader status itself. The 475 election allows a trader to be treated in
some respects as a "dealer" and for dealers, securities are NOT capital
assets and profits / losses are ordinary income / losses. (The 475
election, among other things, requires profits to be reported on Schedule C,
not D.) Another quote from Tesser:
"With the passage of the 1997 tax act, Traders were given the option of
electing Section 475, thereby granting them the same privilege as market
makers." Note that this election is an OPTION for traders, NOT a
requirement.
Regards,
Carroll Slemaker
> It looks as if we have a disagreement of experts. I was quoting from Ted
> Tesser's article on page 90 of the June 2000 issue of Active Trader
magazine
> in which he discusses the 475 election and specifically states that a 475
> election eliminates the preferential tax treatment of the 60/40 split for
> Section 1256 contracts.
>
> Guess we all better do our homework before next tax season.
>
> For those of you who are not familiar with Ted Tesser. He is a CPA who
> specializes in income taxes for traders and investors. His web site is at
> the following URL
>
> http://www.taxtrader.com/home.html
>
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