Capital Gains and Losses
Questions and comments about tax rules for buying and selling stocks, mutual funds, real estate and other assets.
MTM - Capital loss
Posted by: krishkar99, June 26, 2017 11:59PM
I have a full time job and I do trading on my own since my job allows me flexibility of working after 1 PM PST.
My income from my full time job is say: $100K.

I have elected for MTM during my 2015 tax return before April 15,2016. I have incurred losses over $300K in 2016. But, in 2017 as of now, I have profits over $100K and expect to have gains in next few years.

I have not yet elected MTM accounting method for 2016 as I am still trying to check the pros and cons of it. Ofcourse, I did file tax extension.

My questions for the loss I have incurred are:

1. If I do MTM accounting for 2016 and claim the loss of $300K against my $100K taxable income, will the $200K Net Operating Loss be carry forwarded ? meaning can I use that for future years. I read the NOL can be carried back two years, but since I made the election in 2016, will I be able to carry back to 2015 and 2014 tax returns and get additional refund ?

2. Now, since I anticipate to gain a constant $50K-$100K on trading (as I have reduced my risk and more conservative), by doing MTM this year, I will not be able to offset any gains in future years.
If I were to make $100K profit in next 3 years and not able to offset the $300K loss, which refund will be better to claim MTM in 2016 or use the $100K loss offset each year for future years?

3. I want to know can I not elect MTM for 2016, but do the MTM starting from 2017. That way the $300K loss can be carried over ? and how will the taxes be calculated when I do both carry over huge loss and MTM for a gain I make in future years.

I did enough research and spoke to a tax consultant. But, it was not helpful.

Thanks a lot in advance.

- Krish

Re: MTM - Capital loss
Posted by: Les Grans, June 27, 2017 11:35PM
You will want to check the ground rules before you start playing 36 holes on this course. According to a well-respected online author/publisher/webguru, here's an interesting point about the MTM election:

"The IRS chose an unusual deadline for this election. Most elections are due at the end of the year, when you file your return. This election has to be made by the due date without extensions for the previous year's tax return. The last day to make the mark-to-market election for the year 2011 is April 18, 2011 (the unextended due date for 2010 tax returns)."

You may find that your MTM election(s) will be a year too late to do what you think you've done.

Re: MTM - Capital loss
Posted by: triad, June 28, 2017 03:40PM
Once elected, the MTM election stays in effect unless and until the IRS gives you permission to revoke it (and they don't have to--the decision is based on whether or not you have an unusual situation). The revocation would be forward only.

It is NOT made on a yearly basis.

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