Archive for the ‘Trader Taxation’ Category

An Easier Way to Report Capital Gains

February 27, 2015

Taxation of InvestorsIf you have more than a few sales of stocks, mutual funds or other investments to report on your tax return, you may want to be aware of a recent change in IRS requirements for reporting these transactions.

details: Easier Capital Gains Reporting

Covered Call Strategy Was Not Trading

November 14, 2013
By Kaye A. Thomas

The tax law differentiates between investors and traders. The tax rules that apply to traders are generally more favorable, but only a tiny percentage of all the people who buy and sell stocks and other securities satisfy all the requirements for this treatment. A recent case raises the question whether a taxpayer pursuing a covered call strategy can qualify as a trader.
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Waiting for Regs on Net Investment Income Tax

November 7, 2013

This is the first year of the Medicare tax on net investment income, and we’re still waiting for final regulations, which are promised by the end of the year. This tax will cause taxpayers with income above a threshold amount to pay an additional 3.8% tax, on top of regular income tax and/or alternative minimum tax (AMT), on net investment income, including dividends, interest and capital gains. Recent remarks by a Treasury official indicate that the final regs will fix a glitch in the taxation of traders that appeared in the proposed regs, but the official declined to specify how that fix would work. Meanwhile, the IRS has posted a draft of Form 8960, Net Investment Tax (PDF), but don’t expect to learn much by reviewing it. Nearly every line of the form includes the words, “see instructions,” but instructions are not included in the draft. Reason? IRS can’t issue instructions indicating what the regs say until the regs are issued.

Coming Clean on Wash Sales

May 10, 2012
By Kaye A. Thomas

This tax season — the one that just ended for those lucky enough to have filed on time, and the one still painfully dragging on for those who filed for an extension — is the first for which brokers are required to report cost basis, in addition to gross proceeds, on Form 1099-B. An important part of the requirement is that brokers must apply the wash sale rule, which prevents you from claiming a loss on a sale of shares if you buy identical shares within 30 days before or after. Anyone who does a lot of buying and selling might wonder whether the broker applied this rule correctly. You may be surprised to learn that there’s no way to be sure. The wash sale rule is a lot more complicated than it appears, and there are unanswered questions about some aspects of its workings. (more…)

Tax Court Says Day Trading Is Dissipation

March 25, 2011

If you find yourself owing the IRS more than you can possibly pay, you may be able to settle for a reduced amount through a procedure called an offer in compromise. The IRS doesn’t always agree, however. Among other possible reasons, they may reject an offer in compromise if it appears you dissipated assets, consuming or wasting money that could have been used to pay your debt to the government. In a recent case, the Tax Court ruled that the IRS can treat losses incurred in day trading as dissipation. The result is unusual because people who take up day trading generally do so with the thought that they’ll make a profit, rather than fritter money away. (more…)

Friday Wrapup

July 23, 2010

Tax news of interest to investors came mainly from the courts this week, though the IRS gave paid tax return preparers something to groan about. (more…)

Part-Time Gambler Is Professional

July 20, 2010

In a summary opinion, the Tax Court has found that an individual can qualify as a professional gambler despite pursuing the activity part-time. While the decision doesn’t have precedential value, it should help inform us in determining who qualifies as a professional trader. (more…)


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