Software designed for the mark-to-market accounting method.
TradeLog was designed to meet the special tax needs of active securities traders who have elected, or are about to elect the Section 475(f) mark-to-market accounting method.
IRS Section 475(f) Trader Tax Status
Section 475(f) is a special IRS provision commonly called "trader tax status". This election allows business treatment of gains and losses for qualified active traders. There are many benefits to this election, but there are specific requirements as well.
For proper tax reporting:
- Timely election must be made, usually by April 15th of the first year elected by a qualified trader.
- A Section 481 adjustment for change of accounting method must be reported with the first tax year elected.
- Year end open positions must be marked to market. This requires closing each position at fair market price, calculating realized gains/losses, then re-opening into the next tax year.
- Gains and losses are reported on IRS Form 4797 with a detail of all trades included. A list of securities marked-to-market at the end of the tax year must also be attached.
TradeLog Simplifies Mark-to-Market Accounting
While the Section 475(f) reporting needs may sound challenging, it's a simple task with TradeLog software. The software allows you to easily change your accounting method and automates the needed adjustments. At year end TradeLog will mark to market any open positions as part of the End Tax Year process. Generate the key reports you need, including the Form 4797 Details, Securities Marked to Market, and Section 481 adjustment reports.
Many traders who elect Section 475(f) seek professional tax services in order to properly qualify and take full advantage of trader tax status. TradeLog is used by industry leading trader tax professionals. Click here to learn more about our approved service providers.
If you trade Section 1256 (Futures) Contracts...
Section 1256 contracts include regulated futures contracts as well as exchange traded and broad-based index options. The IRS requires these contracts to be priced or marked to market at year end for tax reporting purposes — this is standard for all taxpayers, no election required.
For proper tax reporting all open year end section 1256 contracts need to be closed out at year end prices, a realized gain or loss calculated for tax purposes, and then re-opened using the same year end prices going into the next tax year. The total gain and loss from Section 1256 contracts gets reported on IRS Form 6781. The actual trade details are not required, only the totals.
All TradeLog versions now support Futures and Section 1256 contracts, and include a detailed Section 1256 report for accurately calculating the totals for Form 6781 tax reporting.