Day 1

Question 1

2 Filing options

Answer 1

investor vs trader in securities status

Question 2

IRS’s definition of an investor

Answer 2

a person who purchases and sells securities or other investments with the principal purpose of realizing investment income in the form of interest, dividends and long term capital gain. trading reported on Schedule D and treated as a capital gain or loss

Question 3

1 investor advantages

Answer 3

long term captial gain rate: 15% investor must hold for more than 1 year

Question 4

5 investor disadvantage

Answer 4

1 net capital loss LIMITED to $3000 a year 2 wash sale rules apply that LIMIT to your cost basis 3 DISALLOWANCE of certain investment expenses (cost of attend investment seminars) 4 Margin interest expense is LIMITED to yoru total net investment income 5 Investment expenses treated as a miscellaneous itemized deduction and subject to the 2% AGI LIMITATION

Question 5

Investor disadvange 1. captial loss limitations

Answer 5

LIMITED to $3000 a year

Question 6

investor disadvantage 2. Wash sale rules limitations

Answer 6

wash sale rule example: - bought 50 shares of xyz at $50 per share -the price declined to $30 per share and you sell to claim the loss less than 31 days later you bought xyz again at $32 per share. you can’t deduct the $20 loss per share. - you can add the $20 per share to your cost basis of the new shares so your adjusted cost basis is $52

Question 7

investor disadvantage 3. Disallowance of certain investment expenses

Answer 7

can write off: phone, data, internet

Question 8

investor disadvantage 4. Margin interest limitations

Question 9

investor disadvantage 5. 2% AGI limitations

Answer 9

AGI : adjusted Gross Income

Question 10

5 tax strategies for investors

Answer 10

• tax loss selling: sell losing position at year end

Question 11

5 Trader in securities advantages

Answer 11

• NOL - can receive tax refunds back 2 years against that. mark to market converts everything from captial to ordinary - dont’ have to report wash sales

Question 12

mark to market accounting

Answer 12

lets you write off ALL of losses only if elect MKM accounting by 4/15 if elect. then it is for LIFE! so need to consult with professional. used only for business, not much for individual. benefits options/stocks/ sometimes futures.

Question 13

5 MTM Benefits

Question 14

Can I make the MTM election?

Question 15

IRS defines Trader in Securities

Question 16

additional criteria for trader of securities

Question 17

what courts agree for trader of securities critieria

Question 18

OTA Tax guidelines

Answer 18

at least 166 days trading a year at least 3 trades a day if only trading 166 days a year

Question 19

what happens if you AMEND a tax return (file again with changes)?

Answer 19

A human being will look at it and see if needs auditing or can let it be.