The 475(f) mark-to-market election unlocks unlimited trading-loss deductions, kills the wash-sale rule, and converts trading into a Schedule C business — but only if the election statement is attached to the right return, the entity is set up in the right order, and the trader-status posture survives audit. I draft the memo, file the statement language, recommend the entity, and stand behind the position if the IRS challenges it.
Flat-fee setup, hourly strategy, or a retained relationship for active traders. Direct work with me — no junior associates, no software intake forms.
One hour to pressure-test your trader-status posture, walk through deadline mechanics, and decide whether the election fits your situation.
The full election done right: qualification analysis, filing memo, entity recommendation, first-year compliance roadmap, and quarterly-tax planning sheet.
traderTaxBundle2500). Email owner@terms.law to start; invoice sent within 1 business day.
Year-round legal support for active traders: CTR/8275 strategy, audit-letter response, K-1 reconciliation, and quarterly check-ins.
Six errors I see in audit-defense intake and second-opinion engagements. Each one is preventable. Each one is permanent for the year it occurs.
The election attaches to the prior-year return by the unextended April 15 due date. Filing an extension does not extend the election deadline. Most missed-elections I review came from a CPA who assumed Form 4868 covered both. It does not.
Sole proprietors can elect on Schedule C, but moving to an S-corp mid-year creates a stub-period election problem. New entities have a 2-month, 15-day window from start of trading. Get the entity sequence wrong and the election attaches to the wrong taxpayer.
The 475(f) statement attaches to the prior-year return for an existing taxpayer wanting the election effective for the current year. Attaching it to the wrong return is the #1 reason elections get rejected on examination.
The IRS has consistently rejected late-relief requests for 475(f). Form 3115 with a private letter ruling is the only realistic path, and it costs thousands in user fees with low success odds. There is no "oops" fix — you wait for the next deadline.
Once the election is in force, all open positions are deemed sold at fair market value on December 31. Forgetting this is the second most common audit trigger I see. The deemed-sale gain becomes ordinary income whether you actually closed the trade or not.
Trader status itself is a fact-and-circumstances test — trade frequency, holding period, time spent, intent. Without contemporaneous logs, the IRS treats you as an investor and the entire 475(f) election collapses with it.
The IRS uses a multi-factor test. Walk through these four questions; the buckets at the bottom tell you whether to file, hold off, or get an analysis.
The IRS expects "frequent, regular, and continuous" activity — not a few trades a week, not seasonal trading, not buying-and-holding with occasional rotation.
Trader status requires a short holding period. Investors hold for capital appreciation; traders profit from short-term price movement.
Hours spent matter. The IRS looks at whether trading occupies a significant portion of your time relative to other income-producing activities.
The intent factor is documentary — business plan, separate accounts, dedicated equipment, recordkeeping. Without paper trail, the IRS reads you as an investor.
Six artifacts you receive. Each one is written for your specific facts and trade history — not a generic template that breaks under examination.
Memo applying the IRS trader-status factors to your trade history, holding-period stats, and time spent. Tells you whether the election will survive audit before you file.
The §475(f) statement language drafted to attach to the correct return. Includes IRC citation, taxpayer identifying information, effective tax year, and the trade-or-business description.
Written comparison of sole prop vs single-member LLC vs multi-member LLC vs S-corp for your specific volume, capital, and goals. Self-employment tax, retirement contribution ceilings, and audit signal all factored in.
Month-by-month checklist for the first year under the election: books and records setup, December 31 inventory mark, segregation of investment vs trading positions, year-end reconciliation.
Worksheet projecting quarterly safe-harbor estimates under MTM ordinary-income treatment. Avoids underpayment penalties and the year-end cash crunch most first-year electing traders hit.
Spreadsheet keyed to the IRS factors (frequency, holding period, hours, equipment, intent). Makes the trader-status posture defensible without requiring you to reconstruct it under audit pressure.
Three paths most traders consider. The audit-survivability column is the one that matters when the IRS challenges the election.
Send me a one-paragraph description of your trading volume, current entity (or none), and prior-year tax filing. I will tell you whether the strategy call is enough or whether the setup bundle makes more sense.
Email me directlyEach answer resolves in one sentence before the expansion. Click any question for the full answer.
Real questions from the Terms.Law forum where founders, freelancers, and tenants worked through situations like yours.
Email me a one-paragraph description of your trading volume, prior-year filing, and current entity. I will send back a scope confirmation and the PayPal invoice within one business day.
Email me to start →Disclaimer. The information on this page is for informational purposes only and does not constitute legal or tax advice. Reading this page or contacting me does not create an attorney-client relationship. Section 475(f) elections are fact-specific and depend on your trade history, entity structure, and prior-year filing posture. Past results do not guarantee future outcomes. Sergei Tokmakov is licensed in California (CA Bar #279869); trader-tax federal-law matters that don't require state-specific litigation are handled nationwide. State-tax overlays are flagged when relevant but state-specific representation is referred out as needed.