Which of the following statements applies to active traders who make the mark-to-market election? A. Their...

Which of the following statements applies to active traders who make the mark-to-market election?

A. Their net profits are subject to self-employment tax.

B. They can deduct an unlimited amount of losses against the profits in their trading account.

C. They report all gains and losses as capital gains and losses.

D. They are subject to the wash sale rule if they sell securities at a loss and then buy substantially identical securities within 30 days.

Expert Solution

Option (B) is correct. Active traders who make the mark-to-market election can deduct an unlimited amount of losses against the profits in their trading account. They are allowed to write off an unlimited amount of losses against their profits.

Option (A) is not correct. Net profits of the active traders who make the mark-to-market election are not subject to self-employment tax.

Option (C) is not correct. Active traders who make the mark-to-market election do not report all gains and losses as capital gains and losses..They are allowed to treat gains and losses from sale of securities as ordinary gains and losses rather than capital gains and losses.

Option (D) is not correct. Active traders who make the mark-to-market election are not subject to the wash sale rule if they sell securities at a loss and then buy substantially identical securities within 30 days.

Answer is B. They can deduct an unlimited amount of losses against the profits in their trading account.

Please up vote. Thanks!

ekkarill92 answered 1 year ago

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