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only be carried forward (i.e., to later years). See sec.
1212(b). As a trader in securities, however, he was eligible
under section 475 to elect the mark-to-market accounting method
for his securities trading activity. See sec. 475(f). Under the
mark-to-market accounting method, a trader in securities is
eligible to elect to “recognize gain or loss on any security held
in connection with such trade or business at the close of any
taxable year as if such security were sold for its fair market
value * * * [at yearend]”. See sec. 475(f)(1)(A)(i). In
general, any gains or losses with respect to those securities,
whether deemed sold at yearend under the mark-to-market method of
accounting or actually sold during the taxable year, “shall be
treated as ordinary income or loss.” Sec. 475(d)(3)(A)(i),
(f)(1)(D). An ordinary loss resulting in a net operating loss is
first carried back to the two preceding years before it is
carried forward. See sec. 172(a) and (b).
The procedures for traders in securities to make a mark-to-
market election under section 475(f) are specified in Rev. Proc.
99-17, 1999-1 C.B. 503. In general, the election must be made no
later than the due date (without regard for extensions) of the
original return for the taxable year immediately preceding the
election year and must be attached either to that return or, if
applicable, to a request for extension of time to file that
2(...continued)
position with respect to the tax laws. Traders may
engage in a trade or business which produces capital
gains and losses rather than ordinary income and
losses.” King v. Commissioner, supra at 457.
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Last modified: November 10, 2007