How to Complete IRS Form 4797 for Section 475(f) Mark-to-Market (MTM) Traders

IRS Form 4797 is filed to report the sale of property used in connection with a trade or business. For a taxpayer that qualifies as a trader for federal tax purposes (i.e., trader tax status), the taxpayer may be eligible to make a mark-to-market (MTM) election under IRC Section 475(f).

The MTM election requires the taxpayer to report the sale of stocks as ordinary gains and losses rather than short-term capital gains and losses. This can be beneficial to a trader with substantial short-term losses from trading activities.

The MTM election also requires the taxpayer to mark-to-market any open positions held at the end and the start of the tax year. In most cases, full-time traders will not have any open positions.

For more information on TTS, see our video here:    • Stock Trader Tax Deductions - How to ...  

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