Tax Question.... Trader or Investor Status?

Can you be categorized as a trader if you use auto trade and your account make numerous trades a day overall?

Assuming you are referring to Trader Tax Status, (TTS) probably not. One of the applicable criteria is actual time spent trading by the trader which, with auto trading, is nil.

Yes. C2 trades can be use as TTS. But main requirements is you trade almost daily and don’t hold your trades too many days. Also your main source of income is from trading not your full time job that is 80% of your income.

No, none of your autotrade trades are considered in determining whether you have trader tax status. Also, no trades made in a retirement account are considered either.

You have to actually make the trades in your own taxable brokerage account in determining trader tax status.


Robert Greene, who is considered an expert on TTS wrote a recent article in Forbes regarding the subject:

How does IRS determine who made those trades. Statements from IB or 8949 does not show its autotrade or not. All it shows is your account made these trades.

Actually IB don’t even show these trades are made or received on their statements.

That’s right, Corey. Bob Green, who I personally have done business with, is the foremost authority on trader tax status.

Everyone would be well served to review his article that Corey gave the link to above.

Thanks Corey!


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You can explain that if and when you get audited by the IRS.

Like many things, it’s not a problem until it’s a problem!


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I think c2 won’t fall under automated trading at the end of the article. I think c2 is like a new breed or something in between. But it doesn’t classify as automated trading. Here’s why. I work in the finance industry. All my trades are audited every 30 days. And my compliance dept was very confused how to classify my c2 trading account.

They ask me if this is a SMA, No is not. 3rd party manager account? NO is not. Is this an advisory account? Do you have an advisory agreement with IB or c2? no I do not. Is this a hedge fund? NO is not. Is this an algo or high frequency account? NO is not.

I send them my c2 trading agreement, upon reviewing what you sign with c2 for autotrading. It’s just a self directed brokerage account allow c2 to send in trades on your behalf. Because in the end, c2 or the strategy manage hold ZERO responsibility of the trades or any trading error even if it’s c2’s fault. From this perspective, I can see c2 trades as my normal day to day trading. I do file as TTS each yr and my CPA see no reason why IRS would classify these trades separate from my other trades in my account.

Be sure to let us know how your first IRS audit turns out!

2 yrs ago They didn’t ask me or my cpa if I enter each individual trades thru my cellphone, or thru my laptop, or I personally enter each trade with my thumb or my index finger. They didn’t ask if I enter those trades while standing or sitting down. C2 or my 3rd party advisor was never in a conversation. They mostly focus on my cost basis, MTM calculation and form 6781.

This is an excerpt from Bob Green’s recent Forbes article regarding Trader Tax Status relating to autotrading:

"What doesn’t qualify for TTS:

Three factors don’t qualify for TTS: Automated trading without much involvement by the trader (but creating your program qualifies); engaging a professional outside investment manager; and trading in retirement funds. Don’t include these trades in the golden rule calculations.

This blog post is a partial excerpt from Green’s 2017 Trader Tax Guide. There’s more to learn about TTS in the guide.

Robert A. Green, CPA
Author of Green’s 2017 Trader Tax Guide
Managing Member, Green, Neuschwander & Manning, LLC"

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