TRADERS
GUIDES: TRADER TAX STATUS & MTM: WHAT'S NEW

What's New This Year

An in-depth new guide section on "Case Law"

The current trader tax laws, including the Internal Revenue Code, IRS regulations, revenue procedures, and publications (all included in this guide), do not sufficiently define whether a taxpayer is a trader or an investor. Research Institute of America (RIA), a leading tax publisher states that "whether a taxpayer's investment activities are sufficient to constitute carrying on a trade or business requires an examination of the facts in each case."

Notice the term "each case", which refers to "case law"; the entire collection of published legal decisions of the courts which contributes a large part of the legal rules which apply in modern society. If a rule of law cannot be found in written laws, lawyers will often say that it is a rule to be found in "case law".

In our "Case Law" guide section, we summarize existing case law for traders and list all the relevant cases. We include each case in it's entirety and we added our insight, analysis and observations.

We have noticed a disturbing new trend in IRS audits of traders. The IRS is attempting to deny "money-losing" and/or "part-time traders" business loss treatment (trader tax status) based on their interpretation of case law and how they apply that case law to the trader being audited. It is important that traders understand case law before they claim trader tax status and to use it effectively if need be in an audit. Without this key guide section, a trader is vulnerable to IRS attack. Don't let the IRS make their case for disallowance by 'cherry picking' sections of case law in their favor. In many cases, traders can trump the IRS by showing how their case for trader tax status is supported in case law.

If you are not a clear and convincing case for "fulltime trader tax status" (in the business of trading), we strongly suggest that you carefully read our new 2003 case law guide section.

Our 2003 guide "rule of thumb" for a "close call" on "trader tax status" determinations is as follows:
The IRS may attack your trader tax status if you don't trade fulltime every-day-all-day and/or you have less then 800 round turn trades per year and any of the following conditions apply: you have long average holding periods (over 30-days), you have other business activities or jobs, you are retired and/or unemployed, or you have a spouse supporting your family. If you feel the IRS has any ammunition to consider your trading business a "hobby" or an investment activity versus a business activity, you need this guide.