I have another new client who is a day trader and wow is he good at it! Even though he has another job he makes so much more money as a trader that this ultimately is his primary vocation. The following are a few things I’ve learned in helping this new client with his tax obligations.
1. If you are a day trader who has not elected to mark your portfolio to market accounting method under Internal Revenue Code 475 your expenses are deductible on IRS Form 1040 Schedule C.
2. The most commonly referenced Business Code provided on the Schedule C is 523900. Other financial investment activities (including investment advice) and in my opinion is the most appropriate for a person that meets the definition of “day trader” regardless of the accounting method chosen.
3. Regarding expenses, lodging and meals while away from home at investment seminars are allowable deductions assuming you actually qualify as a day trader under IRC Sec. 274(h)(7) which denies a Sec. 212(l) deduction for (non-business related) “expenses allocable to a convention, seminar, or similar meeting.” However, the Tax Court held that a day trader can deduct the cost of a seminar in securities day trading and related travel expenses under IRC Sec. 162. Read More