Mark-to-Market Election for Traders

Official source

A trader may make an election under section 475(f) to report all gains and losses from securities held in connection with a trading business as ordinary income (or loss), including those from securities held at the end of the year. Securities held at the end of the year are “marked to market” by treating them as if they were sold for fair market value on the last business day of the year. Generally, the election must be made by the due date (not including extensions) of the tax return for the year prior to the year for which the election becomes effective. To be effective for 2025, the election must have been made by the due date of your 2024 return (not counting extensions).

Starting with the year the election becomes effective, a trader reports all gains and losses from securities held in connection with the trading business, including securities held at the end of the year, in Part II of Form 4797. If you previously made the election, see the Instructions for Form 4797. For details on making the mark-to-market election for 2025, see Pub. 550 or Rev. Proc. 99-17, which starts on the bottom of page 52 of Internal Revenue Bulletin 1999-7 at IRS.gov/pub/irs-irbs/irb99-07.pdf .

If you hold securities for investment, you must identify them as such in your records on the day you acquired them (for example, by holding the securities in a separate brokerage account). Securities that you hold for investment aren’t marked to market.

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Mark-to-Market Election for Traders

Official source

A trader may make an election under section 475(f) to report all gains and losses from securities held in connection with a trading business as ordinary income (or loss), including those from securities held at the end of the year. Securities held at the end of the year are “marked to market” by treating them as if they were sold for fair market value on the last business day of the year. Generally, the election must be made by the due date (not including extensions) of the tax return for the year prior to the year for which the election becomes effective. To be effective for 2025, the election must have been made by the due date of your 2024 return (not counting extensions).

Starting with the year the election becomes effective, a trader reports all gains and losses from securities held in connection with the trading business, including securities held at the end of the year, in Part II of Form 4797. If you previously made the election, see the Instructions for Form 4797. For details on making the mark-to-market election for 2025, see Pub. 550 or Rev. Proc. 99-17, which starts on the bottom of page 52 of Internal Revenue Bulletin 1999-7 at IRS.gov/pub/irs-irbs/irb99-07.pdf .

If you hold securities for investment, you must identify them as such in your records on the day you acquired them (for example, by holding the securities in a separate brokerage account). Securities that you hold for investment aren’t marked to market.