It’s a tale of two traders, similar in most respects — except the most important one. One educates himself on trader tax status and makes a timely election for IRC 475 mark-to-market accounting (MTM). After a bad year, he receives immediate tax refunds in the amount of $100,000.

With trader tax status, his expenses are ordinary business expenses rather than restricted investment expenses. Further, because of the MTM election, his trading losses are ordinary losses, rather than restricted capital losses (only $3,000 allowed per year).