I am eligible for Trader Status but I have not made the Mark-to-Market election. I believe you have to make that election prior to the year in which you want it to apply. So my gains would be treated as short-term capital gains instead of ordinary income.
I did not just provided my net gain or loss, I also provided the sum of my winning trades and the sum of the losing trades that would be disallowed in 2020 and realized in 2021. The sum of the winning trades that I would be taxed on is 3.3 million, and the wash sale losses that would be deferred to 2021 is 3.2 million. How did I come up with these numbers? 1099B and TurboTax. Therefore I would pay taxes on 3.3 million despite only making 100k net profit. The issue is that the disallowed loss from the first transaction would not simply roll into the "next" purchase, as I made many buys/sells throughout 2020 and into 2021, it would roll all the way into the most recent one until I stopped trading it. So if I daytraded all year and into January 2021 on the same ticker, all those losses would roll into 2021. I have read the IRS publications on the matter and it explicitly states that a loss cannot be rolled into a winning trade on the same day if you have a later purchase of the same ticker within 30 days. You aren't allowed to use the net gain for the a single day -- you have to separate the wins and losses on that given day. So if on a given day (such as last trading day in 2020), you day trade the same ticker with 100 round trips, and end up with $100k for the sum of the winning trades, and $95k for the losing trades... and you traded the same ticker in January 2021... you would pay taxes on the $100k and roll the $95k losses forward to 2021.
At this time, I think my only options are to hire a CPA/Tax laywer to ask for some kind of waiver/exception. The tax bill is too high (I think) for applying for payments and also I would have too much money for applying for a financial hardship. This is a complete mess!
I hope this message reaches other traders -- please be very careful about wash sale rules!!!
