Tax Tip of the Month

It is only January, but some of us are already thinking about our 2000 taxes. One area that we can look at now, and possibly still change, is our classification, or status, in regards to our investment activities. If you buy or sell securities, you will be classified as either a dealer, trader, or investor.

What is the difference?

Dealer: A person who has an established place of business and regularly purchases securities for resale to customers. In a sense, they are in the business of selling and buying securities.

Trader: One who trades significantly and continuously in an effort to profit from short-term changes in the price of securities. The trading done must be substantial and a large amount of time must be spent on the activity. Also, a substantial amount of the individual’s income must come from trading.

Investor: A taxpayer who purchases securities with the intention of holding them for their long-term appreciation.

Before the year is over, determine where you fall. For tax purposes each of the above categories are treated differently and different types of income, expenses and limitations apply. First, determine where you fall and then give us a call so that we can help you pan to minimize your taxes.

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