More on Day Trading

BY DALE SCHWARTZENHAUER

I believe I can offer a very clear and concise method the courts could take in the day trading arena ( “Day Trading and Self-Employment Taxes” [ JofA , Jan.01, page 80] ).

Since the primary question is what constitutes a trade or business, that determination could be made based on whether one holds a securities license.

Before the advent of day trading, the only “real” traders were brokers or dealers in securities. In addition to meeting various state requirements, those individuals qualified under either NYSE or NASD rules to become licensed. The modern-day traders meet no such requirements because they do not deal with the public. I think this distinction alone can determine whether the activity constitutes a trade or business, or is an investment activity.

Unless a distinction is made along some similar line, numerous court cases could be decided on either side of the argument for years to come.

Dale Schwartzenhauer
Jim Johnson & Co.
Walla Walla, Washington

SPONSORED REPORT

Tax reform changes are now in effect

With all the recent tax law changes, this year it’s more important than ever to make sure your clients’ tax situations are squared away before year end. This report provides necessary guidance to ensure 2019 starts without a hitch.

PODCAST

Using drones to enhance audits

Hermann Sidhu, CPA, global assurance digital leader at EY, walks us through EY’s exciting new project to use drones to help audit large warehouses and outdoor inventories.