IRS Denies Request by a Taxpayer to Make a Late §475(f) Election
In my experience, day traders generally fall into one of two categories: a small minority achieving considerable success, or the majority, rapidly diminishing their previously amassed fortunes once they venture into day trading.
Day trading entails executing a vast number of security sales on a daily basis. An unsuccessful day trader quickly learns that, by default, they are restricted to a net deduction of only $3,000 in losses per year due to the annual limitation on individual capital loss deductions stipulated in Internal Revenue Code (IRC) §1211(b)(1). When the trader’s net losses extend into the six-figure realm, this $3,000 annual limitation can be significantly distressing.
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