10.2 Capital Gains, Losses/Sale of Home: Stocks (Options, Splits, Traders)
I am a stock day trader. I understand I have the option of electing
the mark-to-market method of accounting which would preclude application of
the wash sale rule. What forms and publications do I need?
If your trading activity is a business, your trading expenses would be
reported on Form 1040, Schedule C (PDF), Profit
or Loss from Business (Sole Proprietorship) instead of Form 1040, Schedule A (PDF), Itemized Deductions . Your gains or losses,
however, would be reported on Form 1040, Schedule D (PDF), Capital
Gains and Losses , unless you file an election to change your method
of accounting to the mark-to-market method of accounting.
See Publication 550, Investment Income and Expenses (p.
68) for guidance on how to make the mark-to-market election. You need Form 3115 (PDF), Application for Change in Accounting
Method. The mark-to-market method of accounting cannot be revoked without
the consent of the Secretary.
If you qualify and elect to change to the mark-to-market method of accounting,
you would report your gains or losses on Part II of Form 4797 (PDF), Sales of Business Property .
References:
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