Client emailed me a link regarding form 3115.
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If you haven't already done so, read https://www.irs.gov/taxtopics/tc429. The brokerage firm does not "decide" who's a trader vs. investor. If your client wants to be classified as a trader, he should have made the election in tax year 2020 or earlier. Maybe he did?
From what I've read, the IRS watches this fairly closely and often challenges the trader classification, especially if the person is losing money. Investors try to get around the $3000/year capital loss limitation by wanting to be classified as traders.
I don't have any clients that are traders, so I don't have any first-hand experience.
If I had $153K to lose I think I would learn the tax law about day-trading before the year started, not after it ended.
It wasn't clear because of the typo that what is involved here is the "wash sale" rule. Live and learn.
The 1099-B reads
Proceeds 15,537,248.00. Cost 17,463,846.00. Wash 2,079,619.88. (Short term)
Proceeds 72,366.00. Cost 74,815.85. Wash 1,301.42. (Short term)
Proceeds 14,485.00. Cost 20,098.52. Wash 5,660.54 (Long term)
All basis reported to the IRS.
I put it on schedule D per usual. He has been my client for 5 years. One year he had a loss. Based off of a bad year and this $153,000 plus year he still has an $80,000 loss. Transferred to page Line 7 on 1040 is still -$3,000.
The 1099-B reads
Proceeds 15,537,248.00. Cost 17,463,846.00. Wash 2,079,619.88. (Short term)
Proceeds 72,366.00. Cost 74,815.85. Wash 1,301.42. (Short term)
Proceeds 14,485.00. Cost 20,098.52. Wash 5,660.54 (Long term)
All basis reported to the IRS.
I put it on schedule D per usual. He has been my client for 5 years. One year he had a loss. Based off of a bad year and this $153,000 plus year he still has an $80,000 loss. Transferred to page Line 7 on 1040 is still -$3,000.
"Transferred to page Line 7 on 1040 is still -$3,000."
Conway, I'm not following you. Are you surprised that the loss is limited to $3000.
No I am not surprised. Lol you guys are so HARSH.
Sorry, I wasn't trying to be harsh. I just didn't know why you said the loss was still 3000.
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