Re: year end strategy for MTM

Glad to have you as a long term client Jared.

Confirm your prop trading firm is using MTM, so you have ordinary gain treatment rather then capital gains treatment on your K-1. Some prop trading firms don’t allocate losses to prop traders on K-1s and instead take losses on the Class A members (owners) K-1s only – find out.

I suggest you give Buddy your prop trading firm agreement to read about your class of ownership and how this is handled. I have not spoken with him tonight about this. Sign up for 2003 early on. Thanks.

If your firm uses MTM, then you don’t need to sell positions before year end for “tax loss selling”, since MTM will include unrealized losses.

Trading gains with or without MTM, through a prop trading firm K-1 or a “customer account” (direct access or online, etc) are exempt from self employment taxation. One exception - if you are a dealer in commodities or registered in any capacity on a commodities exchange, you are subject to self employment taxes.

Don’t worry no matter what your circumstances are as a MTM trader, like any other taxpayer, you are entitled to have investment positions that are not part of your trading business and not subject to MTM. Just make sure to follow the careful rules discussed in an earlier post on “segregation.”