IRS Regulations provide some guidance for what the IRS wants to see on your tax return regarding your trading activities, but that might not be to your best tax advantage!!
When there is a disagreement, people go to court, and this can be an expensive undertaking. And do not ever forget that the IRS is the only system of US jurisprudence where the taxpayer is presumed guilty and must prove themselves innocent.
Therefore, this is the most up-to-date listing of court cases and Tax Court Memoranda pertaining to trading. With this you can decide if you have the facts in your favor in order to challenge an IRS Notice of Deficiency.
As you will see, most of the cases pertain to the level of trading required to deduct expenses that are incident to one's trading activity
On the associated pages you will find:
pertaining to stock and option trading.
In some cases the taxpayer prevails but in most cases the government wins, but this does not have to be the case.
By reading through these cases you can structure your trading business to take full advantage of what the law allows.
And, as always, if you have any questions please do not hesitate to contact us.