Friday, November 22, 2019
Internal Revenue Service Essay Example | Topics and Well Written Essays - 500 words
Internal Revenue Service - Essay Example Special rules apply for traders in securities who are in the business of buying and selling securities for their own account tax (Internal Revenue Service, n.d. b). According to the Internal Revenue Service (n.d. b), to be engaged in business as a trader in securities, all of the following conditions must be met: The objective of profiting from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation. The activity must be substantial, and Continuity and regularity of trading activity. Furthermore, according to the Internal Revenue Service (n.d. b), the following facts and circumstances should be considered in determining if the activity is a securities trading business. Typical holding periods for securities bought and sold. The frequency and dollar amount of trades during the year. The extent to which the activity contributes to the generation of income for a livelihood, and The amount of time devoted to the activity. Further, a taxpayer may be a trader in some securities and hold other securities for investment. The special rules for traders do not apply to the securities held for investment. A trader must keep detailed records to distinguish the securities held for investment from the securities in the trading business. The securities held for investment must be identified as such in the trader's records on the day he or she acquires them (Internal Revenue Service, n.d. b). Both the limitations on capital losses and the wash sale rules continue to apply. However, if the mark-to-market election was timely made, then the gains and losses from sales of securities are treated as ordinary gains and losses. Further, neither the limitations on capital losses nor the wash sale rules apply to traders using the mark-to-market method of accounting (Internal Revenue Service, n.d. b).