Does the section 475(f) mark-to-market election ("trader status") apply to Massachusetts state taxes?
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New Member

Does the section 475(f) mark-to-market election ("trader status") apply to Massachusetts state taxes?

The first year after I made the section 475(f) M2M trader election, I had a professional prepare my tax return in order to learn how to apply this rule properly. He told me that Massachusetts doesn't recognize the M2M election, and that trading gains and losses must be reported as short term capital gains and losses. However, a Massachusetts tax auditor I spoke with last year told me that the MA tax code was last linked to the Federal tax code in 2005, so if the Federl M2M election rule was enacted before that (which it was), then it should apply in Massachusetts as well. He didn't give me any specific info since it was peripheral to the subject we were addressing, and I've been having trouble finding any definitive information about whether this is the case, and if so, how to report it, since as far as I can tell there is no Massachusetts equivalent of from 4797.

If I have trader status and had a NOL, can I use that to offset other income on a Massachusetts tax return? If so, how do I report it?

If the law on this has changed recently, I'd also like to know about 2015, 2016, and 2017, since refunds for those years can still be claimed.



3 Replies
Level 15

Does the section 475(f) mark-to-market election ("trader status") apply to Massachusetts state taxes?

the federal code considers a professional trader activity as a business, even though you don't have any inventory or customers.
If MA is aligned ( how could it not be ? ), your state return should be consistent.

Level 15

Does the section 475(f) mark-to-market election ("trader status") apply to Massachusetts state taxes?

Besides, your consolidated 1099-B is sent to the IRS, not Massachusetts
New Member

Does the section 475(f) mark-to-market election ("trader status") apply to Massachusetts state taxes?

I'm confused about how I would report it. Trading losses are reported on US Form 4797. MA Schedule B for Capital Gains and Losses line 17 says "Loss on the sale, exchange or involuntary conversion of property used in a trade or business and held for one year or less (from U.S. Form 4797)", but this form only allows the short term losses to be applied to interest, dividends, and long-term gains, and the rest must be carried over, and similarly applied in subsequent years.  In fact, I see that this is how the aforementioned tax professional did it. On the federal return he reported trading losses on Form 4797, and on the 1040 those losses were reported on the line that says "Other gains or (losses). Attach Form 4797", but for the state return he reported the trading losses on Schedule B, only used them to offset interest and dividends, and reported the rest as carryover to future years. So is this incorrect? Should I be reporting trading gains/losses on Schedule C as business profit/loss?
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