MTM accounting 475f- For Traders

Question 1 - Yes.  In TurboTax, you can report on line 10 of Form 4797 all gains and losses from sales and dispositions of securities or commodities held in connection with your trading business, including gains and losses from marking to market securities and commodities held at the end of the tax year.  However, you need to use the CD or download versions of TurboTax because you will need to go into Forms mode to enter the relevant information on line 10 of Form 4797. TurboTax does not support, in its step-by-step question and answer format, the information that you will need to enter on line 10 of Form 4797.  Forms mode is not available in the online version of TurboTax.  

Forms mode in TurboTax CD/download is activated by selecting "Forms" in the upper right corner of your screen.  Once selected, in the left margin, find Form 4797, select it, and then use your cursor to enter your information on line 10.  If Form 4797 is not in your list of forms, then select "Open Form," enter Form 4797 in the search bar, and select Form 4797.  

Question 2 and 3 - Not exactly.  You don't separately report the unrealized gains or losses, rather any position that you hold at year end is deemed to have been sold for its fair market value on the last day of the year.   In other words, every position is marked to market and is deemed to have been sold at that price at the end of each year.  Thus, there are no unrealized gains/losses in a trader's account (that is the account that has made the 475(f) election).  All gains and losses are realized and reported on the trader's tax return.   The positions that were marked to market then take on a new cost basis.  Arguably, this is one of the downsides to MtM as it accelerates recognition of gains and losses.  

Additionally, for securities traders who have elected mark-to-market accounting (Section 475(f) of the Internal Revenue Code) IRS instructions for Form 4797 provide that the security trader must attach a statement to their return using the same format as line 10, showing the details of each transaction. Moreover, the statement must separately show and identify securities or commodities held and marked to market at the end of the year.  TurboTax does not support the creation or importation of the trader's statement.  Thus, you will need to separately prepare your statement and attach it to your return. Your completed return will need to be paper mailed to the IRS.  

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