Excellent book review of Green's "The Tax Guide for Traders" published by McGraw-Hill.
“Are You a Pro?”
The Tax Guide for Traders can help you figure out if you qualify as a professional trader
Carol Vinzant, Editor
AUGUST 31, 2004
Frequent traders spend all kinds of time and energy figuring out how to make money on lots of little trades. If enough time is not devoted to figuring out the complex taxes involved, they could blow much of their profit. Robert A. Green, a Manhattan accountant who has built a practice specializing in trader tax law, has put all he has learned into a new book, The Tax Guide for Traders, published by The McGraw-Hill Companies (which also owns BusinessWeek Online).
Green gives the kind of advice that accountants less familiar with the world of trading might not offer. For example, he encourages all traders to see if they’ll qualify for professional trader tax status, even if they don’t end up taking all of the benefits. “Gaining trader tax status is beneficial in all circumstances,” he writes.
KEY QUESTIONS. The tricky thing about gaining trader status, Green explains, is that most of the rules were written before online trading really took off. They reflect a black-and-white view of professionals vs. amateurs that doesn’t necessarily hold anymore.
Because of the ambiguity, Green suggest traders ask themselves a number of questions before defining their status: Do they seek to take advantage of daily moves in the market? Is their activity substantial? Do they only hold stocks for a short time?
The benefits of professional status include the ability to write off a greater number of trading-related expenses and a reduction in paperwork, Green points out.
The rest of the book contains technical information on commodities, audits, extension, and other issues that might be of greater interest to accountants than to traders. However, the discussion of who qualifies as a trader will make the book worthwhile for those who aren’t accountants.
The Tax Guide for Traders
The McGraw-Hill Companies
A Tax Rule That Can Bring You Joy
By using “marked-to-market” accounting, active investors can shield more profits and simplify their returns. Catches? You bet
By Carol Vinzant
APRIL 8, 2004
Active traders have until Apr. 15 to tell the IRS that they want to use the “marked-to-market” method for accounting for their 2004 gains and losses — an approach that, if they qualify, will let them shield more of their profits from taxes.
The alternative is to get stuck with a default method, called cash accounting — the one that most individual taxpayers use, whether they realize it or not. Cash accounting limits the net capital loss from trading that you can claim each year to $3,000… BusinessWeek041204