Stock Trader

[Christian]

A client is a devoted albeit poor stock trader. He retired some time ago and has no reportable income but apparently put some money in a brokerage account from wich he makes short term margined stock trades. He has accumulated a sizeable ongoing loss and once again lost money last year. Technically you could argue he does not need to file a return but I have always held he needs to file to show the trades with cost basis and loss or gain. As all his trades are fully reported with basis and gain or loss by his broker it occurs to me he may in fact not be required to file. Any input would be appreciated. Of course, if he does not file he will need to keep the tally of his total losses himself against the possibility he may show a gain in some year.

[Gail in Virginia]

I am not sure you could "technically" make that argument, as it is my understanding that the filing requirement is based on gross income, and not net. So unless his total sales (before reducing for costs) are less than the filing requirement, he would "technically" need to file even though he may have no adjusted gross or taxable income. At least, that is my understanding.

[jasdlm]

Agree with Gail. I think he has to file.

[Christian]

I tend to agree Gail as he does record profits in some of his trades. This of itself would likely require filing as his profits in some years would require it if not for other losses. I simply cannot see a situation in which an individual showing stock trades in excess of one million dollars would not have to file a return substantiating the trades even though brokers now must report basis and loss or gain which in his case means the reporting of all his trades with gain or loss reported.

[Jack from Ohio]

File now or wait a year for the CP2000.