Section 475(f) Mark-to-Market Elections: Meeting Trader Tax Status, Calculating Gains and Losses, and Revocations

In the current economy, many traders have suffered significant losses. A Section 475 MTM election allows taxpayers to deduct decreases in market value immediately rather than waiting until the date of sale. These same losses are treated as ordinary losses, not capital gains subject to the annual $3,000 loss limitation, and could generate a net operating loss carryback. No wash sale or straddle adjustments are needed once the election is made.

Taxpayers who have TTS (trader tax status) can deduct business expenses, including trading expenses, and set up employer benefit plans. TTS is not an election but is a facts and circumstances test and a precursor to the MTM election.

The 475(f) election must be made by the taxpayer’s original filing deadline, for example, April 15th for individuals or March 15th for partnerships. Section 9100 relief is rarely granted for late elections since the IRS and Treasury frown on hindsight choices. Since conversely, unrealized gains are treated as ordinary income once the election is made, serious consideration should be given to the election.

Listen as our MTM expert discusses making a Section 475(f) election, including which taxpayers are the best candidates for the election, calculating and determining income and expenses for traders, and when and how to revoke the election.

1. Section 475(f) mark-to-market elections
2. Trader tax status
   • Employee benefit plans
   • Deducting business expenses
3. Making the election
4. Benefits
5. Caveats
6. NOL carrybacks
7. Entity considerations
8. Applying for 9100 relief
9. Revoking a 475(f) election

The panelist will review these and other critical issues:

• When is the MTM election due?
• What are the tax benefits of the 475(f) election in addition to current ordinary loss deductions?
• When and how taxpayers could benefit by establishing a separate entity for trading activity?
• How difficult is it to revoke an MTM election, and what are the ramifications?
• What are the differences between TTS and an MTM election?

Learning Objectives

After completing this course, you will be able to:

• Determine how taxpayers are taxed after an MTM election
• Decide by what date an MTM election must be made
• Ascertain when revoking a 475(f) might be beneficial
• Identify taxpayers who may benefit from a Section 475(f) election

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of individual income taxation, including itemized deductions, individual income tax credits, net operating loss limitations including carrybacks and carryforwards.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).