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Mark To Market Election


This site is designed to help you understand the tax and trading implications of making the Mark-to-Market Election including:

  • What is the Mark-to-Market election?

  • Trader Type determination

  • Advantages and Disadvantages

  • Electing Mark-to-Market for an Entity

  • Compliance

Also included are real-life examples of trades and how to report them on your tax return as well as testimonials from site users.


Trader in Securities - TIS or Trader

Mark to Market - MTM

Mark to Market Trader - MTMT

* Note that there is no such thing as "Trader Tax Status" or "TTS".  That terminology is not used in the Internal Revenue Code, Regulations or Tax Court cases.  IRS does not convey "Trader" status nor is it a moniker that can be attained.  Therefore, that term is used nowhere on this website.


This is not meant to be a treatise on accounting, which would put most people to sleep, but you should know the various methods before electing.

So what is an accounting method?  It is basically the way income and expenses are recognized.  There are two basic methods, Accrual and Cash.  However, there are also several "hybrid" approaches, only one of which we will discuss on this website, mark-to-market accounting.

Accrual - is used by most larger businesses; Income is reported as it is earned and invoiced while expenses are reported as they are incurred, both of which are independent of cash changing hands.

Cash - is used by small to medium-sized businesses that do not carry inventory, although there are exceptions to that as well.  Essentially it is accounting using one's checkbook ... as cash is received, for the most part it is recorded as income and as cash is expended it is recorded as an expense.

Mark-to-Market - is used in several situations, typically in securities and commodity trading.  As a dealer in securities it is required but as a trader in securities, it can be elected.  It entails "marking to [fair] market [value]" at year-end all securities held at that time.  Any differences are recognized for tax purposes.  Therefore, if there is a loss, a tax benefit may be obtained whereas if there is a gain that can work out to be a tax detriment in that tax is owed but the securities held have yet to be monetized (actually sold for cash).


What Type of Trader are You ...

  • Purchases securities for capital appreciation​

  • Typically dividend-paying stocks

  • Long-term perspective

  • Perhaps 50 trades per year

  • Regularly and continuously profit from short-term market fluctuations

  • Trade adjustments based on changing trend

  • Short-term perspective

  • Probably 40-50 trades per month or more

  • Qualifies as a Trader in Securities

  • Election must be made to IRS

  • All open positions adjusted at year-end

  • Probably 40-50 trades per month or more




We provide a complete line of tax return preparation services, including but not limited to:

  • Complete tax return preparation including states

  • MTM tax compliance

  • Consultation

  • Trade tracking templates

MTM Election Template download.jpg
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