Re: Are 200 trades enough to qualify for business

[quote]Well if 200 short term trades aren't enough, then what does justify a traders business legally..

thx
GT :cool: :o [/quote]

200 round turn trades can be enough to qualify, but all your other factors need to be very strong.

Your intention needs to be clear, 'to profit from quick swings in price and not long term profit appreciation and dividends.'

Your trading business should be your main business activity or job and provide your means of 'making a living.' You can have other jobs, but then the IRS raises the bar and wants to see even more trades.

A specific number of trades are not required in any of the IRS laws. Instead, tax court cases say yes or no on trader tax status for different cases with different number of trades. One case said no on 150 trades; an IRS agent recently said yes.

You need to make your own trades and not use a broker. Some court cases had brokers making the trades and that was the reason they ruled no.

You need short term holding periods of day trades to a few days. Holding positions open for weeks hurts your status.

You need to spend hours every day all day in your trading business and use all the tools of the trade. You should have a serious amount of trading business expenses; around $5,000 or more.

Sporadic lapses in your trading activity also hurts your trader tax status.

The IRS sees every one of your stock sales on your Form 1099-B, but they don't see your commodities trades.

When you are a close call on trader tax status, we recommend a strong footnote with your tax return to nip any IRS questions in the bud.

If you are a very close call, consider increasing your volume with very small positions.

Good questions and thanks,