I have traded for most of the year while I work at my full time job as a software developer. I am using it to augment my income. I like working in academia but it just doesn't pay that well! I started in late January and made trades in every month of the year. The median holding time per position was about 3 days (so I was trying to capitalize on short time price swings).
I'm new at trading, so I made some emotional mistakes and if my calculations are right
I lost about $5000 I gained about $1400 by the end of 2013. I calculated this by doing the mark to market on 12/31 and subtracting the account balance (~69,200) (~75,900) as of that day from the total amount of cash I've put in (~74,500) as of that day. The numbers above are corrected; I had forgotten to mark my SPY position to market. So my actual gain was ~$1400, but according to my Scottrade tax report, due to the wash sale rules, it looks like I gained $20k! This is punitive.
The only way out that I can see is the mark to market election, but I'm wary of it. I'm not certain I qualify, and I'm not certain I want to KEEP trading every year from now on (I might want to transition to a more traditional investing pattern if there is a big correction in the market). But I am certain I don't want to pay a few thousand dollars of tax on some imaginary gains! :( Does anybody know specifics about how hard it is to get permission from the IRS to come back from the M2M election? And are there any red flags in this scenario which would mean I'm not even eligible for it?
Category Gross Proceeds Cost Basis Wash Sale Loss Disallowed Net Gain/Loss A (basis reported) $1,698,367.79 $1,854,734.46 $168,059.55 $11,692.88 B (basis not reported) $3,104,256.07 $3,534,153.57 $438,278.99 $8,381.49 Total $4,802,623.86 $5,388,888.03 $606,338.54 $20,074.37