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Day Trading: Mark-to-Market 475(f) Election?

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techstocktrader View Post
I did some more research into the number of trades required to qualify for mark-to-market. This CPA created video tells us you only need to make 60 trades per month or 720 total trades per year and you "count the buy and sell, or open and close, separately." This means you only need to make 360 round trips per year total or 1.44 round trips per day if you have 250 (50 weeks x 5 days per week) trading days per year.

Regarding number of days to trade, the CPA advises you trade at least 75% of the available ≈240 days or 180 days (240 x 75%). 720 total trades/180 days ≈ 4 total trades or 2 round trips per day.

Regardless of how you calculate the number of days you trade, as long you are trading in a consistent manner, the total number of round trips should be 360 round trips to quality for mark-to-market. This number is much lower than I thought only 2 weeks ago.

Of course, you should not rely on my information or a YouTube video. You should consult a local CPA, if you can find one, who understands these daytrading issues. You will probably need to call many different local CPA's before you find one who even knows what you are talking about. I don't think I will be using Green Trader Tax because their sales and marketing office is located in Connecticut and their operational office is listed as a PO Box in Alabama. I prefer to have a CPA who I can drive to if there are any problems.

I will buy the Green's 2018 Trader Tax Guide in PDF format though.

I'm actually a Green Trader Tax client, or Green Neuschwander & Manning client as I believe they are now known, and have been for 7+ years. In summary they are excellent, and really really know their stuff when it comes to trading related issues. The founder is Robert Green who is based in the North East. If you need any consultations regarding entity setups etc they will probably be with him. The partner in charge of my account (Neuschwander) and the accountant that does the majority of the work are both in Alabama. They have an online portal for uploading documents, and are extremely responsive to emails. I also think they are competatively priced, but don't have a lot of experience with other accountants. I've been very happy with the limited dealings I have had with Robert, the semi-regular dealings I have with Neuschcwander and the constant dealings I have with my accountant, who has remained the same for all 7 years. Robert Green is THE go to guy on trading accounting and writes regularly for most of the trading publications and for Forbes. They have a huge amount of info on their website including the following...

Green’s Golden Rules For Qualification For TTS
Our golden rules* for qualification are based on years of experience. The trader has:
  • Substantial volume – at least four total trades per day, 15 per week, 60 per month (Poppe court)
  • Substantial proceeds
  • Regular
  • Frequent – a trade execution on 75% of available trading days
  • Continuous
  • Time
  • Daily market movements – average holding period under 31 days (Endicott court)
  • Intention to run a business and to make “a” living
  • Business setup
  • Materiality

They also have, or at least had, some blogs detailing the IRS court cases on this matter, but I didn't wanna do all the work for you. Feel free to PM me if you have specific questions.

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