No. It is not the IRS that is the problem. The wash sale rules are not what cause most traders to lose money.
Your likely right on this, but taxing money that does not exist does seem to be a genuine reason why traders lose money after I researched it. I seen numerous horror articles, not just that one I posted. I seen others where a trader may have made say 20K in reality, but the IRS says they owe them like 100k or more. Effectively taxing 80K that does not exist.
Being able to claim trader tax status (TTS) is not accomplished by any election; it is an optional tax status and is based on facts and circumstances each year. So someone can qualify as a TTS in one year and not the next.
But the election still must be made on the prior years taxes for the coming tax year?
Volume, frequency and average holding period are key items that the IRS will look at.
Based on a tax court case, leading commentators recommend an average of 4 trades per day, four days a week, 16 trades per week, 60 trades per month and 720 per year on an annualized basis.
Check, as mentioned above I have more then done this and even devoted what could be termed as start-up expenses to it, monitors, stock news services and upgraded my internet service.
"The wash sale rules were put in place to avoid "playing games" at the end of the year."
So this part is wrong, it does not matter if I stop 31 days before the end of the year to let the stocks cool off and the losses take hold? Because I can still keep the 720 trades and stop in November, that is not an issue for me. However, will the losses be capped at 3K? So take my current Wash Sales of approximately 10K, will the IRS say that only 3K of those count, even if I stop 31 days before the end of the year?
"What the TTS allows the taxpayer to accomplish is to take expense deductions on Schedule C.
Staying informed and staying ahead of the wash sale rules at the end of the year will be key.
Good luck."
Definitely and thank you for answering all of my questions, and helping me greatly. I definitely am researching this topic in other avenues. It just surprising how much of the info actually contradicts each other.
