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    Home » Securities Trader vs. Securities Investor
    Verde Valley News

    Securities Trader vs. Securities Investor

    October 11, 2012No Comments
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    Healing Paws

    By Gary Krupa, CPA
    October 11, 2012 

    Significant tax advantages are available if you qualify as a trader of securities rather than as an investor in securities. Trading would enable you to report trading activities as if you were conducting a business even if you buy and sell securities for your own account.

    • You wouldn’t be limited to deducting $3,000 in losses per year on securities transactions, as you would be if you filed Schedule D Form 1040 as an investor;
    • Interest expense and other investment expenses would be deducted directly from Gross Income, rather than from Adjusted Gross Income on Form 1040. This means they’d be deductible even if you take the Standard Deduction rather than itemize your deductions.
    • You wouldn’t pay self-employment tax on gains and losses from selling securities, as you would on other business income greater than $434.

    This is why “trading” and “investing” are not synonymous at least as they relate to the tax law.

    More information, including how to qualify as a securities trader, can be found in:

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    • Tax topic 429 on the IRS website, http://www.irs.gov/taxtopics/tc429.html
    • IRS Publication 550 “Special Rules for Traders in Securities”, on the IRS website or at http://taxmap.ntis.gov/taxmap/pubs/p550-029.htm

    It may not be easy to qualify as a trader in securities. Read this Forbes article that explains how difficult it was for one individual to qualify as a trader, even though he was involved in high dollar-volume activity buying and selling securities.

    http://www.forbes.com/sites/peterjreilly/2011/07/11/trader-in-securities-status-difficult-to-attain

    Gary Krupa is a CPA in Arizona, with more than twenty-five years experience providing accounting, tax, audit and computer services to organizations of all sizes. He’s especially attentive to the needs of his clients. He moved to Rimrock, Arizona in late May 2008. He has offices in Rimrock and Peoria, AZ. His e-mail address is gkcpa@q.com. His website URL is http://garykrupacpa.com.

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    City Council Weighs ATV Ban Ordinance Proposal
    By Tommy Acosta
    The Sedona City Council at its May 23, 2023 meeting took no action on a proposed ordinance that would ban all off-road vehicles from being driven on state-owned public roads or streets owned by the city. The ordinance, spearheaded by Sedona Mayor Scott Jablow on the premise that such vehicles pose a risk to the health, safety and welfare of the community, would impose heavy fines to anyone driving the ATVs or OHVs on city streets, including S.R. 179 and S.R. 89A. ATV rental companies have admitted that such vehicles are not intended or designed to be driven on paved roads, yet, in Arizona, they are allowed to do so under Arizona Revised Statute 28-1174 (4B). Opponents against the ordinance argued at the meeting that if adopted the ban would cripple the ATV rental industry in Sedona and cause much hardship to the owners and employees, as it would effectively, as written, destroy their livelihood. Read more→
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