A "Trader", as opposed to an "Investor", is not limited to deducting $3,000 per year on their tax return and instead can deduct an unlimited amount of "realized" and "unrealized" trading losses against their ordinary income. As an example, if you have trading losses of $50,000 and other ordinary income of $150,000 (e.g. from full time employment wages or self-employment income), your net gross income is $100,000 as a trader, but it's $147,000 as an investor. As a trader, your taxable income is more than $47,000 less than as an investor (considering other haircuts on itemized deductions based on adjusted gross income). If your margin tax rates are 40% for federal and state, then your tax savings is approximately $19,000.
Consider that you may have been holding stocks at December 31, 1997 with "unrealized" losses and you are holding those stocks looking for come back in their stock prices. You might be able to deduct those "unrealized" losses as a trader on your 1997 tax return.
As Barron's wrote (in their December 8, 1997 article, "Who's a Trader"), "Securities traders, who get a better deal from Uncle Sam than mere investors (traders, unlike investors, get unlimited deductions for investment interest and other trading expenses) have just been awarded a world-class bonanza: From out of left field, and with remarkably little fanfare, the 1997 Taxpayer Relief Act gave traders the option of reporting on a mark-to-market basis-essentially to recognize gains and losses on securities held at the end of year as if they were sold on that day-an opportunity for major cuts in their tax bills."
How to qualify as a "Trader", document that tax position and report it on your tax returns are the key questions and concerns. We are tax specialists and are experts in this area. If you are interested in learning more about the rules of being a trader, and receiving an initial free consultation from us about whether you qualify, send us an email to firstname.lastname@example.org. Please also visit our Website at http://www.greencompany.com. Taking this trader position is complicated and we strongly suggest that you consult with us about all your facts and circumstances before proceeding.
Here is an example of a new client we just helped from these stock message boards. We helped them qualify as a trader in order to get the above-mentioned trader tax benefits. John Doe (real name is confidential) is a computer engineer working full-time at a computer software company. John closely follows trends and developments in the computer markets. John has a self-directed Internet trading account with no involvement from a broker. John traded mostly computer stocks 40 times during the year, with each trade averaging $15,000 of proceeds. John's sale proceeds that were reported on his calendar year 1997 Form 1099 were $600,000. John exploited his knowledge of the computer industry as a computer professional to actively trade computer stocks. He had all the tools of a trading professional at home and at work using the Internet. John trades for the short-term, looking for quick price swings rather than long-term price appreciation.
In prior years it was not as easy as it is now to qualify as a trader. Advances in the Internet, PC hardware and software, and on-line stock brokerage firms have made it easier to qualify.
We apologize to any message board users who feel this message is commercial oriented and that it does not discuss the price of this. We posted the message to add value to traders who may have incurred losses of late (from buying or shorting this stock) and who may be interested in an added value trading benefit.
Good luck with your AAPL trading.
By the way, I have also been an Apple trader and like the company long-term. As long as the Apple hardware/operating system is leading edge (which it still is) and if it can run all software on cross platforms, it is a winner for sure.