Should I open an LLC and file for Trader Tax Status with MTM?

[davejaffee]

I'm an active trader, i fit the criteria for trader tax status.

if i elect for this, along with mark to market, is it generally beneficial?

Also, should I open an LLC?

I would like to trade as TTS and MTM for the entirety of 2018, if I form a new LLC now (December 4, 2017) would i be able to elect MTM treatment for all of 2018?

I was under the impression that I'd have to attach a statement on my 2017 taxes indicating that for 2018 i'd like to change my tax accounting to MTM.

But, then I read somewhere that if you open a new LLC, you can choose MTM accounting from the beginning.

[CalCountry · Accepted solution]

This is a forum principally designed to help customers use the TurboTax software.  Your questions go far beyond that basic purpose.  Sophisticated tax advice is best sought from a qualified tax professional.

[davejaffee]

I'm a customer of TurboTax. I have been for years. Thank you.

[fanfare]

To qualify for MTM is difficult.  See https://www.irs.gov/taxtopics/tc429
before you go to the hassle and expense of an LLC.

[davejaffee]

@fanfare hi. thanks. I have read that document and believe that I qualify. I trade options and have about 2,500 trades a year.

[davejaffee]

@fanfare If i opened an LLC now, would I be able to choose TTS with MTM for 2018 or would the earliest I'd be eligible be 2019?

[fanfare]

You don't really need to form an LLC, you can be a sole proprietor and use (indirectly) Schedule C.
I did some research on how to enter that in TurboTax.
As far as making the election, formally, and when it takes effect, [see tax topic 429]

[fanfare]

If you qualify, you can make the MTM election for 2017. The topic discusses this. Then you're stuck with it.

[davejaffee]

@fanfare Hi. Thank you. When you say "the topic discusses this", what are you referring to? Also, I know you can be a sole proprietor with TTS and MTM, I've read that it's easier to form an LLC because if you choose to discontinue MTM, then you can simply stop using the LLC. Whereas if it's individual, you have to ask the IRS to formally revoke and change the MTM vs realized gains.

Also, to elect MTM for 2017, can you link me to the topic research please?

I was under the impression that during my 2016 tax filing (in April 2017), i'd have had to attach a note which would make me eligible for TTS with MTM for the 2017 tax year and then, when filing the 2017 taxes, in April 2018, i'd have to include a Form 3115.

Thoughts?

[fanfare]

" a trader must make the mark-to-market election by the due date (not including extensions) of the tax return for the year prior to the year for which the election becomes effective. "
OOPS. I read the sentence too hastily  (key word - "prior to").

[davejaffee]

@fanfare Cool. So pretty much, I can elect file a form with my 2017 taxes by April 15, 2018, indicate that my change of accounting will be effective for the year 2018, and then, by April 15, 2019, I can file with the accounting method being MTM (for 2018 tax year) and attach a form 3115.

Correct?

[ruthkingeux]

If you are asking this question that you don’t have enough information. When I don't know what to do I open a book or try to find someone who can do it. In your case you have to read IncFIle LLC and you will find all information that you need. Same advice I gave to my friend when he decided to open LLC. You are what you know and what you can do. Never stop doing something if you don’t have enough knowledge you always can ask for help. By the way my friend already said thank you million times for my advice. So don't think twice.