PRINCIPLES OF EVALUATION IN EDUCATION

Actually upon my research into the IRS Publications it does not appear as bad as I thought. A tax firm specializing in trading activity, says: o They allow a full deduction of all trading losses in the year they occur, thereby circumventing the historical $3,000 net capital loss rule.

o They allow full current expensing of trading expenses without limitation, thereby circumventing the limitation on miscellaneous itemized deductions. o They enable the active trader to still take advantage of the beneficial long term capital gain rules.

o They enable the active trader to circumvent the restrictive "Wash Sale" rules normally applied to investors, thereby alleviating a huge record-keeping nightmare.

o They allow the active trader to deduct losses on open as well as closed positions.

Continuing on with my IRS research:

• You would report your trader's activity as a business on Schedule C of your 1040, possibly allowing all the deductions for your classes and tools, versus a limitation on deduction for passive trading that would have had to be reported on your.
• Schedule A with a 2% AGI limitation deduction. But here is the sweet deal: you can still elect to report your gain or loss on.
• Schedule D as a capital gain unless you made the mark-to-market election, (which has you claim the income as ordinary income on Form 4797 instead of Schedule D - see IRS Publication 550 for more information on this). Just to be safe, you better talk to an accountant that specializes in stock market trading. Being a retired accountant, I want to tell you that most accountants will not know how to treat your trading income properly - you need to understand this.

The proper classification of your investment activities is important to determine how income and expenses are to be reported.

• Traders that buy and sell securities frequently can report their purchases and sales result in capital gain and loss, and their deductible expenses are trade or business expenses.

Happy Trading!