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crowmjc
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Reged: 11/02/03
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Losses 2003- Much Bigger Income 2004- Options?
      #39 - 11/02/03 08:59 AM
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Full time Actively traded 03/03 to 10/03...25 trades/day...lost a little on stocks but commission expenses are very large in comparison. Will make much more income next year from new job. Will now be much less active....1 day every 2 weeks.

I want to try to minimize my 2004 income (my and my wife's joint 6 figure income) and even for the next 3 years after that...son going to college...trying to get more aid.
What is the best way to use the losses/commission expenses to lower next year's income....trying to use more than the 3000 if even possible. And how many years can I carry forward these losses...until used up? I could go MTM with the husband/wife partnership if that is your advice but it seems counter to lowering next years income, right?



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GreenGTTCPAAdministrator
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Reged: 10/31/03
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Re: Losses 2003- Much Bigger Income 2004- Options? new
      #42 - 11/02/03 09:47 AM
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[quote]Full time Actively traded 03/03 to 10/03...25 trades/day...lost a little on stocks but commission expenses are very large in comparison. Will make much more income next year from new job. Will now be much less active....1 day every 2 weeks.

I want to try to minimize my 2004 income (my and my wife's joint 6 figure income) and even for the next 3 years after that...son going to college...trying to get more aid.
What is the best way to use the losses/commission expenses to lower next year's income....trying to use more than the 3000 if even possible. And how many years can I carry forward these losses...until used up? I could go MTM with the husband/wife partnership if that is your advice but it seems counter to lowering next years income, right?
[/quote]
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For sure you have trader tax status for the period of the year you actively traded Ė March to October. You need to be careful with how you show this on your tax return so the IRS does not challenge your part year business status. We have examples of part year traders in our Individual Examples Guide. We also recommend our tax preparation services to make sure you handle all issues correctly (entry, exit and more).

If you have the defacto husband and wife general partnership factors for 2003, you may be able to file a partnership return with MTM; for ordinary loss treatment (and avoiding capital loss limitations).

Your slowed trading activity now is too low to qualify for trader tax status.

2004 is a new game and the best laid plans may change. If you continue trading infrequently you wonít have trader tax status and you will have investment rather then business treatment. So you canít then use MTM in 2004, whether you have a general partnership or not. You will be stuck with future capital loss treatment if you lose money. Better to get your 2003 losses as ordinary losses so you donít add to excess unutilized capital loss carryovers (no limit on future years).

Consider a consultation with me to discuss the husband wife general partnership approach for 2003. Sign up here http://www.greencompany.com/Traders/TraderConsulting.shtml.
Read http://www.greencompany.com/Traders/TraderEntities.shtml#husbandandwife


--------------------
Robert A. Green, CPA & CEO
GreenTraderTax.com

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