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GreenGTTCPAAdministrator
CPA & CEO
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Reged: 10/31/03
Posts: 275
Re: year end strategy for MTM
      11/02/03 02:44 PM
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If you have trader tax status (business treatment) and timely elected MTM on securities by 4/15/03, you are required to use MTM on your “trading positions” for 2003. You may not use MTM on your “segregated investment positions.”

If you mix trading and investment positions together in an account and clearly some positions act like trading positions and not investments, the IRS may argue that MTM should be applied to those trading positions. This may be the case for your 80 day/swing trades per year.

80 day/swing trades per year are not enough to qualify for trader tax status and then MTM could not be applied anyway.

However, the IRS may view your prop trading business activity together with your other trading activity, which means the IRS may want you to use MTM on the 80 day/swing trades per year.

Most prop trading firms are broker/dealers and use MTM by default. A few of them don’t use MTM. Find out which accounting method your firm uses. If you receive a K-1 as an LLC member in a prop trading firm that uses MTM, your trading gains and losses are included on line 1, along with business expenses.

When you are an LLC member, your election for MTM has no effect on your K-1, since the MTM election or default status is handled on the prop trading firm entity-level.

Your case is nuanced and the IRS can go either way, therefore if you want a tax loss before year end, don’t count on MTM and instead sell the position to be sure of the loss for 2003.

Consider our firm for preparing your return. We can take a much better look and give you the best advice at tax time (and for more year end planning).

Read our article on Year End Tax Planning here. http://www.greencompany.com/EducationCenter/GTTRecStratYearEndPlanning.shtml

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

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Subject Posted by Posted on
* year end strategy for MTM quereau 11/02/03 01:49 PM
. * Re: year end strategy for MTM GreenGTTCPAAdministrator   11/02/03 02:44 PM
. * Re: year end strategy for MTM Jared   11/02/03 03:51 PM
. * Re: year end strategy for MTM Jared   11/02/03 03:57 PM
. * Re: year end strategy for MTM GreenGTTCPAAdministrator   11/02/03 05:25 PM

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