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How many years can a day trader carryback losses after making "mark to market" election?

Level 3


Can someone help answer a question I have regarding the number of years a trader can carry back NOL after making "mark to market election.

1. How many years can a day trader carryback NOL. I have read different versions (2yrs and up to 5yrs) online, but I am unable confirm the information from IRS.gov. Providing me with the specific section that deals with the mark to mark election and the years the trader can carryback NOL will be very helpful.

2. How does the day trader reclaim the prior years NOL after the election? Reclalim all NOLs in 2024 tax year or file form 3115 and amend the afftected years returns.

Thank you for your help.

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2 Comments 2
Level 14
Level 14

NOL carryback eliminated. Generally, you can only carry NOLs arising in tax years ending after 2020 to a later year. An exception applies to certain farming losses, which may be carried back 2 years. See section 172(b) and Pub. 225, Farmer's Tax Guide.

Link. https://www.irs.gov/publications/p536

Level 8

Can you please post links to where you read that day traders can carry back NOLs 2 or 5 years?

Where have you looked at IRS.gov?  Have you tried Pub 536?

Regarding the specific section that deals with mark to market elections would IRC 475.  The specific section that deals with NOLs would be IRC 172.

For your second question, its unclear what prior year NOLs you would be referring to.

However, a trader making a mark to market election under IRC 475(f) is also required to file Form 3115, for a change in accounting method.  The change code is DCN 64.  As you work through Form 3115 and the 481(a) adjustment I think it might answer some of your questions regarding how to treat a negative income adjustment.