Ask yourself these questions |
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Investor |
Trader |
MTM Trader |
| Are your trades mainly for the purpose of gaining longer term capital appreciation or dividends? |
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Do you spend lots of time researching and executing your trades?
*A lot of time could be pegged at, say, 20 hrs a week. Remember, there are no official IRS guidelines |
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| Can you show a regular and continuous pattern of averaging several trades during the hours market is open? You can take vacations and breaks. |
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| Are you strictly in short-term positions? Getting in and out of all your positions on the same day proves you intend only to profit from short-term market swings, as is appropriate for trader. |
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| Do you hold longer term positions? |
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in a separate account! |
in a separate account! |
| Do your "yes" answers to the above questions apply to a continous period of at least six months? |
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| Did you net profits after all your deductible expenses? All businesses have bad years, but the IRS says that a "real" business is generally profitable at least three out of each five years. |
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| Can you say you do not have another full time profession or job besides trading? IRS takes a skeptical view of part-time traders. |
N/A |
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| Will you likely be claiming trader status in the tax year following this one? As you are in the business of trading stocks, a one year only commitment where you do not follow up with same status the following year would appear more along the lines of a hobby or aborted investment effort. |
N/A |
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| Did you file MTM election with the IRS by April 15, 2000? If not, you will not be able to claim MTM status until 2001, provided you file the election by April 15, 2001. Please be sure you understand the implications of this decision before filing the election. |
N/A |
N/A |
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