Proper tax planning requires thorough analysis of an individual’s complete financial and tax situation. While there are some general rules, effective tax planning is very specific and a unique plan should be tailored on an individual basis.

Taxpayers who wish to reap all the benefits of a Section 475 election may still do so by forming a new trading entity which can make the election by placing a statement with the required wording in its books and records within 2 months and 15 days of its inception.

Some ways to have both mark-to-market accounting benefits and capital gains rate advantages are:

  • Elect MTM accounting in a new entity set up for trading activities and retain non-MTM securities identified as investment positions. This can be used as an effective planning tool in some cases to allow a taxpayer to utilize unused carry forward losses and have available the ability to have long term capital gains taxable at the preferential lowest capital gains rates
  • Elect MTM accounting for your personal trading and set up an entity to trade assets that will utilize the advantages of favorable long term capital gains tax rates
  • Elect MTM accounting for your trading account and segregate and identify other securities in a separate brokerage account which can have capital gains tax rate apply
  • One spouse can be set up as a MTM trader while the other spouse with clearly segregated assets can be considered an investor