Sch C for Traders without 475 election

[sam992116]

I have counted my Trades for year 2022. They are 500 trades (both buy and Sell) and frequency rate is around 80 %. I traded 80% of trading days (200 out of 250 days).

80% of gain are short term gains for entire year 2022.

Is this sufficient to qualify as traders or kind of borderline? This year I have more trades and more profits. so one could argue you have to start somewhere?

Previous years I have been filing as Investor and this year I will be filing as Trader. I have few questions regarding filling out Sch c. I hope someone could help.

Which accounting method to use? I assume CASH is easy one.

When did I start my business? I assume 2022 as prior years don't count? What should be date Jan 1st 2022?

My business carry inventory? I guess trading assets are not inventory

My business buy and immediately sell? I guess No

[Mike9241 · Accepted solution]

the courts, if the IRS contests TTS, is the final judge on who can use TTS.  I provided a link to one discussion on what it takes to qualify for TTS. Is your 500 trades a killer vs the over 700 in the court case? could be.  the minimum number of trades/year has not been formalize in any IRS pronouncement. You should consult with a tax pro that could go over all your trading data. what you risk if TTS is denied is the loss of all schedule C deductions which would likely increase your taxes. my opinion, and it's just that an opinion, is that TTS is at risk. the number of your trades is less than 70% of what was ok for Poppe

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One landmark court case in determining how many trades a day trader must make annually in order to obtain trader tax status was William F. Poppe vs. the Commissioner of the IRS. It was decided that Poppe could indeed claim trader tax status for (among other things) making around 60 trades per month. This kind of trading activity indicates that a trader intends to benefit from the short-term price swings of securities by buying and selling stocks.

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https://traderfyles.com/how-to-qualify-for-trader-tax-status/#:~:text=You%20must%20spend%20enough%20... 

here's another discussion of what it takes for TTS

Special rules apply if you're a trader in securities, in the business of buying and selling securities for your own account. The law considers this to be a business, even though a trader doesn't maintain an inventory and doesn't have customers. To be engaged in business as a trader in securities, you must meet all of the following conditions:
You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation;
Your activity must be substantial; and
You must carry on the activity with continuity and regularity.
The following facts and circumstances should be considered in determining if your activity is a securities trading business:
Typical holding periods for securities bought and sold;
The frequency and dollar amount of your trades during the year;
The extent to which you pursue the activity to produce income for a livelihood; and
The amount of time you devote to the activity.
If the nature of your trading activities doesn't qualify as a business, you're considered an investor and not a trader.

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cash basis is ok. 

Jan 1 or the date of your first trade for the year - start of business.   

 as per the other discussion you don't have inventory so the answer to the other question would also be no