1. Are You a Trader?
The IRS wants to know

2. Classifying Investors and Traders
A trader in securities is engaged in the business of buying and selling securities for the trader’s own account. To be engaged in the business as a trader in securities:
A trader must seek profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation
Trading activity must be substantial, and
A trader must carry on the activity with continuity and regularity.

3. Classifying Investors and Traders
A taxpayer who trades in securities is considered an investor if the taxpayer’s activity does not meet the definition of a trader. Investors typically trade in securities to profit from the investment earnings and capital appreciation.
Frequency and holding periods

4. Reporting Rules – Investors, Traders
Mark to Market Trader
Form 8949
Part II Form 4797
Schedule A
Schedule C
Yes No
Gain or Loss reported on…
Expenses reported on…
Margin Interest reported on…
Wash sales rules apply?
Capital loss limitations apply?
Eligible for Office in the Home?
Earnings subject to SE taxes?

5. Traders may hold Securities for Investment
The rules for investors will apply to those securities. The securities held for investment purposes must be clearly identified as such before the close of the day on which the security was purchased
A taxpayer who trades in securities is considered an investor if the taxpayer’s activity does not meet the definition of a trader. Investors typically trade in securities to profit from the investment earnings and capital appreciation.
Frequency and holding periods

6. Mark to Market Elections
A trader in securities may elect the mark-to-market accounting rules method. Under this method, securities held as a trader are treated as being sold and reacquired for Fair Market Value (FMV) on the last day of the tax year (calendar or fiscal year?)
Gains or losses are treated as ordinary gains or losses and reported on Part II, Form 4797, instead of as capital gains and losses on Form 8949.
The mark-to-market election does not apply to securities held by the trader for investment.

7. When to make Mark to Market Elections?
The election must be made by the original due date of the tax year prior to the year for which the election is to be effective.
For example, the mark-to-market election for tax year must be made by April 15th, Approval from the IRS is not required, but once the election is made it applies for all later tax years and cannot be revoked without IRS consent.

8. Tax “FREE” if the rules are followed
ROTH Accounts
Tax “FREE” if the rules are followed

9. ROTH Rules – Regular, High Test (401k)
< 50 - $5,500
> 50 - $6,500
< 50 - $17,500
> 50 - $23,000
After Tax
After Tax deferrals
Basis & Earnings
Yes No
Modified AGI
Contribution limits…
How Money Goes In…
How Money Comes Out…
Inherited Rules apply…
RMD Rules apply?
Contribution Phase outs?
Available Plan Limitations?

10. Tax “FREE” if the rules are followed
Questions?
Tax “FREE” if the rules are followed