|F. A. Q.|
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||Copyright© 2001 - 2014 Colin M. Cody, CPA and TraderStatus.com, LLC, All Rights Reserved.|
1.1) What is the purpose of this FAQ?
1.2) What is Versus Purchase or VSP?
1.3) What is a Wash Sale? (SEC definition)
1.4) What is a Wash Sale? (IRS definition)
1.5) What are "Cash-Settled Options"?
1.6) What are "Physically Settled Options"?
1.7) What is the "trade through" rule?
1.8) Who are DMMs?
1.9) What is the Order Protection Rule - Rule 611?
1.10) What is the "tick" test?
1.11) What is Naked Short Selling?
1.12) What is Regulation SHO ?
1.13) What is Regulation FD ?
1.14) What is Give-Up?
1.15) What is Give-In / Give-Up Management?
1.16) What is Buy Side?
1.17) What is Sell Side?
1.18) What is a Boiler Room?
1.19) What is a Bucket Shop?
1.20) What is an Accredited Investor?
1.21) What is so-called High Frequency Trading?
1.22) What are Flash Orders and Flash Trading?
1.23) What is Dark Pool Trading?
1.24) What are Expert Networks?
1.25) What is clawback?
1.26) What is ?
2.1) What is a Margin Account?
2.2) What is a Portfolio Margin Account?
2.3) What is a Margin Call?
2.4) What is an Outstanding Call?
2.5) What is a "Reg. T" Call?
2.6) What is a Fed Call?
2.7) What is a Maintenance Call?
2.8) What is a Day Trading Buying Power Call?
2.9) What is a "Friendly Loan" used to cover a Day Trading Buying Power Call?
2.10) What is a Day Trading Minimum Equity Call?
2.11) How is Buying Power computed?
2.12) How are "Available Funds" computed?
2.13) How is Day Trading Buying Power computed?
2.14) What is Free-Riding? (cash accounts and the pattern daytrader overnight positions trap)
2.15) What is Free-Riding? (IPO rule)
2.16) What is a "cabinet trade"?
2.17) What is "loss prevention"?
2.18) What is the Margin Requirement for a Concentrated Account?
2.19) What are "seg funds"?
2.20) What is Cash-up-front?
2.21) What is a Side Letter?
2.22) What is a Side Pocket?
2.23) What is two and twenty?
2.24) What is Cost of Carry?
2.25) What is the Carry Trade?
2.26) What is the Currency Carry Trade?
2.27) Treasury Bonds?
2.28) Treasury Notes?
2.31) Treasury FRNs - Treasury Floaters?
2.32) Other Margin Information
3.1) What is a Pattern Day Trader and the PDT rule?
3.2) What happens once an account is classified as a Pattern Day Trader?
3.3) Does the IRS require a Securities Trader to be a Pattern Day Trader in order to qualify for Trader Status?
3.4) What is a Professional Trader (Subscriber)?
3.5) Those Professional Trader rules sound complicated. Can you give me more rules to really make my head spin?
3.6) Does the IRS require a Securities Trader to be a Professional Trader (Subscriber) in order to qualify for Trader Status?
3.7) What is Nasdaq Level I ServiceSM ?
3.8) What is Nasdaq Level II ServiceSM ?
3.9) What is Nasdaq Level III ServiceSM ?
3.10) What are Tape A securities (A/NYSE)?
3.11) What are Tape B securities (B/Regional AMEX)?
3.12) What is the Consolidated Tape?
3.13) What are Tape C securities (C/Nasdaq)?
3.14) What is a Prop Trader (the real deal)?
3.15) What is a Prop Trader ("arcade trading")?
3.16) What is a Quant Trader?
4.1) What is "Ticker Spam"?
4.2) What is a Controller?
4.3) What is a Comptroller?
4.4) What is Channel Stuffing (legal)?
4.5) What is Channel Stuffing (illegal)?
4.6) What is Bill and Hold (legal)?
4.7) What is Bill and Hold (possibly misleading)?
4.8) What is Bill and Hold (illegal)?
4.9) What is Shipped in Place?
4.10) What is Pretexting?
5.1) I am single and file form 1040. If I decide to start trading for a living as a sole proprietor, how do I tell the IRS I'm going to file under Trader Status and when must I tell them?
5.2) Ok, so I'm going to start filing under Trader Status as a sole proprietor, how do I now tell the IRS I'm going to use the mark-to-market method of accounting right from the start and when must I tell them?
You tell them by filing an election statement attached to either form 1040 or form 4868 no later than April 15th of the year in which you started trading. e.g. the previous year's tax return. The election statement must be clear that it applies to your securities trading or your commodities trading (or both your securities trading and your commodities trading).
5.3) Hold on! What if I only decided to start trading as a sole proprietor after April 15th?
5.4) What? But that isn't fair!
I agree, it is not fair. It is simply the law, as it now stands.
5.5) So I file under Trader Status as a sole proprietor for the first year, how do I then elect to use mark-to-market for a following year and when must I tell the IRS?
You tell them by filing an election statement attached to either form 1040 or form 4868 no later than April 15th of the year which you will start using the mark-to-market method and you also file two copies of form 3115; one with your form 1040 by April 15th of the next year and at the same time, one with the National Director's office.
5.6) You keep mentioning trading as a "sole proprietor." What if I use a separate entity, does this make any difference?
5.7) What is UBTI?
5.8) What is UDFI?
5.9) Can an IRA account be a type 2 "Margin Account" or must it be a type 1 "Cash Account"?
5.10) What is a Federal Tax Lien?
5.11) What is a Tax Levy?
5.12) What is the U.S. Code?
6.1) What are the Pink Sheets?
6.2) What are the Yellow Sheets?
6.3) What are Blue Sheets?
6.4) What is the Beige Book?
6.5) What is a Green Shoe?
6.6) What is Breaking Syndicate?
6.7) What is a White Shoe?
6.8) Who are the Hoity-Toity?
6.9) Who are (the) Hoi Polloi?
6.16) DBA or d/b/a?
6.44) UTMA regret?
6.52) F9 Monkey?
7.3) Prime lending rate?
7.4) Federal funds rate?
7.11) D/E (Debt/Equity)?
7.13) The 28/36 Rule (front-end and back-end ratios)
7.14) 33/45 mortgage loan ratios
7.19) Freddie Max allowing assets to benefit the DTI?
7.23) ACH credit?
7.24) ACH debit?
7.25) Regulation D, Section 204.2(d)(2)?
7.27) Ante-Dated or Back-Dated?
7.28) Certified Mail?
7.29) Rule of 72?
7.30) Rule of 78?
7.38) White Plastic?
7.39) Monetizing the debt?
7.40) Quantitative Easing?
7.41) Operation Twist?
8.1) What is a "Pure Trust"? I read in a book I paid $35 for on the internet that if I set up a Pure Trust for a cost of $2,500 that I will eliminate all my taxes, legally and completely!
The pure trust scam has been around for decades, but with the internet the pitch has become more wide-spread. The IRS has a few links which verify that most pure trusts are scams: link #1 and link #2 (formerly link #2b) and link #3. Many of the other trusts being promoted that are not actually scams do not eliminate income taxes as the trustee is usually lead to believe pdf file of IRS publication #2193 and pdf file of IRS publication #4310. Well designed trusts can be very useful, especially for wealthy individuals, but trusts do not eliminate taxes the way the pure trust promoters suggest they do.
8.2) Well okay, I wasn't sure about those pure trusts anyway How about forming Nevada Corporations? These have to be all they say, especially when used to avoid State of California taxes, right?
Nevada Corporations have many beneficial purposes, just like corporations formed elsewhere can be beneficial. But as far as many claims of tax avoidance that are often associated with corporations formed in Nevada, much of it does not hold true for people who do not actually live in Nevada but who at the same time want to use and control the assets held by the corporation.
8.3) Joseph R. (Joe) Banister, a former IRS Criminal Investigation Division Special Agent learned of serious constitutional questions relating to the federal income tax and the federal banking and monetary systems. Mr. Banister’s expertise in the fields of accounting, finance, taxation, and law enforcement enabled him to inform people about the legality of the US Income Tax System. Clearly Banister and others like him (Irwin Schiff comes to mind) wouldn't say these things if they were not true!
8.4) Is there anything to this new "Straw Man" theory that, for example, John Q. Smith does not need to pay taxes assessed by the IRS against JOHN Q SMITH because the words in all uppercase letters must be referring to some other legal entity and not to John Q. Smith?
8.5) What about Securities Traders, using a partnership and claiming a tax deduction involving "notational principal contracts"?
8.6) Is there a difference between Tax Avoidance and Tax Evasion any longer?
8.7) What is BOSS?
8.8) What is Son of BOSS?
8.9) What about Ed Brown vs. IRS?
8.10) What is a Fraud Technical Advisor (FTA)?
|F. A. Q.|
Last updated: June 10, 2014January 2014
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