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Subject:
TAX: trader status
Date:
Sun, 3 Aug 97 22:21:54 +0000
From:
Conrad Bowers <cpbow@xxxxxxxxxxxxx>
To:
realtraders@xxxxxxxxxxxxxx
Has anyone had good or bad experiences with claiming trader status
(i.e., calling the trading a business).
Besides being employed fulltime in a scientific field, I am a small
futures trader, end-of-day but fairly short holding times (1-4 weeks on
average?). I spend a lot of time on it, and have done some system work
on Trade Station. I've spent far too much on books, subscriptions,
etc. I lost a good bit of money in 1996, although I've probably
recouped 2/3 of that this year. After reading Ted Tessler's book I
think I might be able to consider it a business. The advantages, as I
understand them:
I could deduct all expenses, even commissions this year, even though I
don't have capital gains, without any limits, against my other income.
I would, however, be limited to the amount of the capital losses I could
deduct to the usual amount.
I probably could deduct NOW, my computer (which I use exclusively for
trading), and something for the room in which I work on trading.
Am I correct in my belief that commissions are deductible only for a
trading business ("trader") and not for an investor? Does anyone know
if the amount listed on the 1099 for futures P/L includes commissions?
I would not be deducting anything* I wouldn't eventually be able to
deduct against capital gains later (assuming I had some). But, because
of very tight finances now, it would be a great advantage to me to
deduct them this year instead of having to wait. So I'm inclined to try
the trader status. (*except commissions?)
Any input? (I need to do this by Aug. 15.) Shortly before Apr 15, when
I went to the local IRS office, they looked at me like I was a Martian
when I asked about futures trading, so I don't think I can get help
locally! Thanks!!
Conrad Bowers
cpbow@xxxxxxxxxxxxx
Conrad,
When your broker sends you (and to the IRS) a 1099 the total includes
comission. You are not able to deduct comission on your tax return as
these Comissions are already added to your losses or deducted from your
profits on your 1099. Trader status has nothing to do with comissions.
Ted covers this in his book. I'm not sure if you are trading stocks or
Futures but if you do trade futures the most important thing to remember
(in my opinion) is that losses may be carried Forward and Backward. This
is not true for stocks,only futures. Regardless of whether you are an
investor or a trader.
Regards,
Tom Brun
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