Frequently Asked Tax Questions And Answers
Keyword: Wash Sale
10.2 Capital Gains, Losses/Sale of Home: Stocks (Options, Splits, Traders)
I am a stock day trader. I understand I have the option of electing the
mark-to-market method of accounting which would preclude application of the wash sale
rule. What forms and publications do I need?
If your trading activity is a business, your trading expenses would be reported
on Form 1040, Schedule C (PDF), Profit or Loss from
Business (Sole Proprietorship) instead of Form 1040, Schedule A (PDF), Itemized Deductions . Your gains or losses, however,
would be reported on Form 1040, Schedule D (PDF), Capital
Gains and Losses , unless you file an election to change your method of accounting
to the mark-to-market method of accounting.
See Publication 550, Investment Income and Expenses (p. 68) for
guidance on how to make the mark-to-market election. You need Form 3115 (PDF), Application for Change in Accounting Method. The mark-to-market
method of accounting cannot be revoked without the consent of the Secretary.
If you qualify and elect to change to the mark-to-market method of accounting,
you would report your gains or losses on Part II of Form 4797 (PDF), Sales of Business Property .
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