Can I deduct a prop firm challenge fee as a business expense under my S-Corp with Mark-to-Market (MTM) election for trading?

Yes, you can generally deduct a prop firm challenge fee as a business expense under your S-Corp with a Mark-to-Market (MTM) election for trading. Here are the key points:

• Ordinary and Necessary Expenses: The IRS allows deductions for expenses that are ordinary and necessary for your business
• Since the prop firm challenge fee is a cost associated with your trading activities, it can be considered a deductible business expense.
• MTM Election: With the MTM election, you treat your trading activities as a business, which allows you to deduct related expenses on your S-Corp's tax return.

For more detailed information, you can refer to the IRS guidelines on traders in securities.

Original Post