Today TaxMama hears from Mike from the Internet, who implores, “Please help. I am a stockbroker. I trade very actively for own account, day trade, short sell etc., hundreds of trades per year. Can I claim trader status and can I go back previous years to claim trader status in order to recoup bad losing years rather than offset future gains or the $3,000 yearly loss limit. Thanks so much. “
Hi Mike,
Stop losing money. It’s not fun. And it’s not productive.
But just because you’re executing trades, doesn’t make you a trader, for tax purposes.
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The rules are fairly complex – and involve both trade volume and time devoted to your own trades.
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You’ll have to decide if you qualify. To make the decision, please read this article – read ALL of it. It spans several pages. Although it is several years old, I don’t think any of the rules defining traders have changed.
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And, since the article was written for tax professionals, it also includes citations to legal cases that might be similar to your situation. It was written for the NAEA’s EA Journal.
The article is: Is Your Client an INVESTOR? a TRADER? or a MARK-TO-MARKET TRADER? by Nancy E Goedecke, an enrolled agent in Massachusetts.
https://www.taxmama.com/Articles-Pro/traders.html
If you don’t understand it in full, that’s OK. Point your tax professional to it. S/he will understand.
Or just get in touch with Nancy and hire her to prepare your tax returns – or your amended returns, if you qualify.
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But, Mike, if you’re losing your own money? How are you doing for your clients?
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This does not bode well for them. Perhaps another line of work is in order?
Remember, you’ll find answers to questions about trading and all kinds of tax issues, free. Where? Where else? At TaxMama.com
[Note: If you were subscribed to the e-mailed TaxQuips, you’d get special tips that aren’t published anywhere else. Please click on the subscribe link and join us.]- Ask TaxMama :: Where taxes are fun and answers are free
- TaxMama articles by Nancy E Goedecke, :: Is Your Client an INVESTOR? a TRADER? or a MARK-TO-MARKET TRADER?
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