I am not a profession tax preparer but have been fighting the Trader Tax Status battle for some time now. First of all the Mark To Market 475(f) is very confusing and complex. But most importantly it is only useful for someone who loses money. I do day trading and virtually never lose money. One reason is that I have lots of shares at a very wide range of cost basis and can always find a lot that is in profit. It should also be noted that most brokerage accounting software packages cannot be trusted as they do not assign the lots accurately much less optimally. This can create fictitious "wash sales". I go into my account every night after the brokerage updates the database and I fix and optimize all lots in "Closed Unsettled Status". In other words if my method is LIFO (Last In First Out) and I bought 100 shares at $92 and sold them the same day for $93, there are times when the brokerage finds a different lot at $91 for example and creates a "fictitious wash sale". I check the sold lots and either make sure it is at the correct $92 cost basis or I might optimize if I find an available lot with a cost basis higher than $92 but less than $93. The proceeds are the same but by using a higher cost basis I minimize my realized taxable gains.
Back to Trader Tax Status. A few problems that arise are that the use of a Schedule C for benefitting from entitlement for using a Schedule C is that you have no income and TurboTax will not allow you to take any deductions like Home Office or anything else that requires gains to work against. Also make sure that you do this correctly since security gains are not subject to self employment tax and have their own tax rate which most likely is less than convention earned income. I would add that I wasted 45 minutes and $270 paying for a consultation with Robert Green and he refused to answer my key questions and instead went through his standard dog and pony show. But he did mention that his technique is to use a "Transfer Method" to move gains from the Schedule D to the Schedule C to resolve the lack of gains there which messes up TurboTax in any computations that require a postive amount for the gains. However he refused to answer the question of what form and line or how does one use his "Transfer Method". So far I have not been able to find any reference anywhere as to how to do this and I fear that it would mess up the self employment tax and the proper capital gains tax computation. In the end I have found a competent CPA who specialized in Trader Tax Status. I am now working hard to organize all of the data to properly send to him. It is extremely important to note that Trader Tax Status is the absolute best kept secret in the industry. Also almost no broker, CPA, or tax lawyer has ever heard of it. So if one is serious about TTS I strongly encourage you shop around for a CPA who specializes in TTS and absolutely very that he/she is a professional and actually knows TTS properly. There is too much money at stake and chances of being audited if something goes wrong. Also note that if you call the IRS and ask any question related to TTS they will hang up on you and you will never get an answer from them on anything related to TTS.
