Capital Gains & Losses

Securities “Trader“ Losses

The capital gain and loss limitations do not apply to the securities of a “dealer”, except for securities held primarily for investment. Nor do they apply to real estate sales by a dealer in realty, except for property as an investment. A “trader” as distinguished from a “dealer” in securities is subject to the capital gain and loss limitations. A securities “dealer” is similar to a merchant in that he purchases securities with the expectation of reselling them for a profit. The profit is based on hopes of finding a market of buyers to purchase the securities in excess of his cost. A “trader” buys and sells securities for his own account. A trader’s expectations of making a profit depend on the rise in value to sell at a price in excess of cost. More details can be found in IRS Publications 544 and 550

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