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EDUCATION CENTER
INTERACTIVE: GTT MESSAGE BOARD
Traders
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Trader Tax Status
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Steve
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stranger
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Reged: 06/02/04
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Posts: 1
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Loc: NJ
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Tricky Question/Issue
#428 - 01/31/05 11:16 AM
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I make about 10 trades/day on average (so around 2000 trades/year), have elected mark-to-market and meet the IRS definition of a daytrader.
However, recently I got into a position and held it overnight, and unfortunately my account is now below $25k. The problem is that I can't liquidate because I don't have enough money to bring the account back over $25k to continue trading at this time. I am stuck holding this position.
Question: Since I am now in a single position for 2-3 months until my account gets back over $25k so I can continue my business as usual, will I run into any IRS troubles down the road with regards to my previously pristine daytrader tax status? Because I have no choice but not to trade until my account is back over $25k again which depends on this 1 stock...
(Old joke: An investor is a daytrader who got stuck in a bad position)
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Re: Tricky Question/Issue
#429 - 02/04/05 06:11 PM
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Very interesting question and sorry for your difficult predicament.
You were a business trader and business circumstances forced you to close down your business trading activity (although not your research) for a few months. Yes, the IRS can consider this a sporadic lapse in trading and challenge your trader tax status. But I think this is a reasonable cause for the sporadic lapse and if you resume you should be okay on trader tax status. It is nuanced.
Suggest you consider us for tax preparation at the end of the year.
Good luck and thanks.
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Robert A. Green, CPA & CEO
GreenTraderTax.com
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