Do the wash sale rules apply to a day trader making several hundred trades a year? Especially when he will trade the same stock three or four times a day.
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Bus. Code
If I treat the above post as a day trader in business for Sch C, what is the appropriate business code - can't seem to find one. -
Yes, the wash rules apply if you are classified as a Trader in Securities, (reading your post—I would say you client doesn’t qualify as a Day-Trader). See the instruction for Schedule D. page d-3.Do the wash sale rules apply to a day trader making several hundred trades a year? Especially when he will trade the same stock three or four times a day.
If you make the Mark-To-Market election, then the wash rule doesn’t apply. See in instruction for Form 4797 page 2. Also, see Pub. 550
Try code 523120, if that doesn’t work—use code 999999If I treat the above post as a day trader in business for Sch C, what is the appropriate business code - can't seem to find one.Comment
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one trade per day
>>a day trader making several hundred trades a year... especially when he will trade the same stock three or four times a day<<
An average of about one trade per day is probably not substantial activity unless it involves a great deal of research and is the taxpayer's main source of support. "Especially" the fact that on some days he had a lot of trades is further indication that he didn't do it regularly.
I'm always surprised at questions about day traders and wash sales. It's only a deferral of the loss. If the loss continues, most trading strategies would favor quitting before it gets worse. In that case you can take all the accumulated losses. If the stock turns around, the typical day trader strategy would be to lock in that gain, again by getting out and taking all the acumulated losses.
With the mark-to-market, you don't worry about wash sales because you report all losses even if you replaced the stock. It's too late for that election for 2005, however, and even for 2006.Comment
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