I am a stock day trader. I understand I have the option of electing the mark-to-market method of accounting which would preclude the 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 (PDF), Investment Income and Expenses (p. 63) 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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