Ah, you came back! That must mean you passed the first hurdle: you spend a lot of time researching and executing your trades, you average 1,100 round trips, you are playing strictly short-term positions, and you trade a substantial dollar amount in a year.
Now for the second set of hurdles. Did you actually make money after all your deductible expenses (investment publications, internet access charges, computer, software, seminars, etc.)? A real business, day trader or any other business, generally must be profitable at least 3 years out of 5.
Can you say you have no regular full-time job or profession? The IRS is skeptical that you are a trader when you have another job and do not trade on a full-time basis. However, the Tax Court says it can be okay.
Obviously, because of the huge advantage of being a day trader, the IRS is going to do its best to prevent this. If you are claiming trader status for last year, will you be able to do so for this year too? Remember you are supposed to be in the continuous business of trading stocks. A multi-year commitment looks more like a business. Theoretically, a trader business can start and fail in the same year, but it will be more difficult to prove.
Keep in mind that this is by no means, cut and dried and is merely an interpretation of some court cases. This area of the law remains uncertain due to a lack of official guidance by the IRS. Ever wonder if they do that on purpose?
Deborah (Debbie) Stevens is an MBA, CPA, Money Maven who offers down to earth accounting, tax and consulting services, is a health and fitness coach, and jewelry designer and re-engineerer. With more than 10 years in public accounting and 6 years in private industry, her boundless energy and talents are now focused on making small businesses successful by analyzing the problems, discussing the issues, and crafting the appropriate solutions. Her strong, personal integrity, hard work, sheer determination coupled with a deep fun-loving view of life are what makes her tick. After having lost 116 lbs in 15 months, she has recently added weight loss and fitness coaching into the business mix. She is passionate about everything she does with a deep desire to help people. She is personable, down to earth, and ready to roll up her sleeves and get started on your business solutions. 
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OK,…little scared of day trading so I’ll stick to what I know. Although earning a profit is tough at times, I’m working on it
I know what you mean, Bill. The IRS keeps it just nebulous enough to prevent most people from trying to take advantage of the laws here. Thanks for stopping by.
Again, very insightful. It doesn’t apply now but it will one day! Thanks for the gems!
Hi Dewane,
Thank you so much for your comments. I want bragging rights to say that I “knew you when” when that day comes.