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resulting from the mark-to-market election shall be treated as
ordinary income or losses. Sec. 475(d)(3)(A), (f)(1)(D). If a
taxpayer is in a business as a trader in securities and makes a
mark-to-market election with respect to sales of securities held
in connection with his or her business, the net loss from that
business will be an ordinary loss, deductible in full under
section 165(c)(1). See secs. 165(a), (c), (f), 1211(b)(1);
Lehrer v. Commissioner, supra; Chen v. Commissioner, supra.
Conversely, if the mark-to-market election is not made, the net
loss is deductible only to the extent of any capital gains plus
$3,000. See secs. 165(a), (c), (f), 1211(b)(1); Lehrer v.
Commissioner, supra; Chen v. Commissioner, supra.
Mark-to-Market Election Procedures
We are asked to determine whether petitioners and SPK made
effective mark-to-market elections. A mark-to-market election
may be made without the consent of the Secretary and, once made,
applies to the taxable year for which it is made and all
subsequent taxable years unless revoked with the Secretary’s
consent. Sec. 475(f)(3). Section 475 and the regulations do not
provide procedures that specify the time and manner of making a
mark-to-market election, although the Commissioner issued
proposed regulations in 1999. Sec. 1.475(f)-1, Proposed Income
Tax Regs., 64 Fed. Reg. 4378 (Jan. 28, 1999).
We look to the legislative history of section 475 to
determine congressional intent because the statute is silent as
to the procedures that must be followed to make a mark-to-market
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