New (tax) year, new help!

Fixed Assets and UltraTax CS 2023 help is now on Help and Support. We're still moving articles, but you can find most content for the 2023 tax year there. Continue using the Help & How-To Center for tax years 2022 and older.

Question

Where do I enter gains and losses from securities or commodities held in connection with a trader's trade or business so that the losses are not subject to the $3,000 capital loss limitation?

Answer

If the trader had a mark-to-market election under section 475(f) in effect for the tax year, trading gains and losses are converted to ordinary income and loss and reported on Form 4797, line 10, not Schedule D. Enter qualified transactions in Screen OthAsset (located in folder Other with Return) in the statement dialog attached to the Sales and holdings by trader who made a mark-to-market election field. Securities and commodities held for investment by traders are still reported on Schedule D, and you should enter this information in the statement dialog provided in Screen B&D in the Income folder.

The election must be made by the due date (without extensions) of the tax return for the year prior to the year in which the election is to be effective. To be effective for 2018, the election had to have been made by April 15, 2017. To make the election for 2019, select election 43 in the Election No. field in Screen Elect, located in the General folder. The election for 2023 must be made by April 18, 2022.

After making the election to change to the mark-to-market method of accounting, the trader must change the method of accounting for securities under Revenue Procedure 99-49. This method requires that unrealized gains and losses be recognized at the end of the year, and that securities held for investment be identified on the day they are acquired. Revenue Procedure 99-49 requires Form 3115, Application for Change in Accounting Method, be filed for the year the election becomes effective. For example, the original 2018 election is filed with the 2017 return, but the Form 3115 is filed with the 2018 return. Once the election is made, the trader must continue to use the mark-to-market method of accounting for all future years. The election can be changed only with the consent of the IRS. For more information on this election, see IRS Publication 550, Revenue Procedure 99-17, 1999-7 I.R.B. 52 and sections 475(e) and 475(f).

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