Capital Gains & Losses
Securities Trader - “market to market” rules.
Securities Dealers are required to follow the IRS “market to market” rules. Traders may elect to use the “market to market” rules. If elected, all security gains and losses are treated as ordinary income or loss, and all securities on hand at the end of the year are deemed to be sold at the end of the year at Fair Market Value. The unrealized gain or loss on a security increases or decreases the basis of the security. The benefit of making this election is that “traders” can take ordinary loss deductions for short term trading losses that are not subject to the $3,000 per year limit. Also the “wash sale’ rules do not apply. Taxpayers may make the "market to market" election by attaching a statement to a timely filed return for the taxable year immediately preceding the election year. It is also necessary to complete IRS Form 3115 - Application for change in accounting method.
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