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We have had an exchange student from Germany living with us. Can we claim him as a dependent? -- Barry McMann


"Probably not," says Bill Fleming, director of personal financial services for


in Hartford, Conn. Anyone claimed as a dependent must be a U.S. citizen or resident of the U.S., and most foreign students do not meet either of these criteria. Check out

Publication 17

- Your Federal Income Tax

for more details.

If your exchange student is from a legitimate exchange program and is in grade 12 or lower, you can take a charitable deduction for any out-of-pocket expenses you have incurred in housing him. But there's a catch: Your charitable deduction is limited to $50 a month, says Fleming.

I guess it's better than nothing.

When Does My Holding Period Start?

What would the actual buy date be for a stock that was exercised from a call option? In January, I bought Tibco Software (TIBX) May 20 call options, and in March, I exercised those options. I am trying to figure out what would be the actual purchase date of those shares? Would it be the day I bought the call option or the day I exercised the option? -- Rahul Desai


If you exercise your options and end up with stock, your holding period begins the day after you exercise your options, says Richard Shapiro, an

Ernst & Young

securities tax partner in New York. In your example, the holding period began in March, not in January when you bought the calls.

Must I Mark to Market My Trades?

Can I become a trader and not elect the market-to-market option? I want to report all my gains and losses on Schedule D. I have large profits every year and all I really want is to deduct my large investment expenses and margin interest on Schedule C. I have a large adjusted gross income, which will wipe out my Schedule A deductions. -- John Ben-Ner

TheStreet Recommends


First, I'm assuming you meet the

stringent standards to file as a trader, and you're not just filing as one because your adjusted gross income disqualifies you from taking any itemized deductions for trading-related expenses on

Schedule A

- Itemized Deductions


Second, marking your trades to market -- that is, valuing them as if they were sold at year-end -- is an

election. Traders are, by no means, required to do so. But if you did, you'd report your trading gains and losses on

Schedule C

- Profit or Loss from Business

, and, more importantly, there would be no limit to the amount of losses you could use to offset gains.

But there are lots of reasons you might not want to make this election. The main one is that once you do, you must mark to market every year unless you make a special appeal to the

Internal Revenue Service


If you file as a trader without making the mark-to-market election, you would report all your gains and losses on

Schedule D

- Capital Gains and Losses

, just like the rest of us.

But as a trader, you could include your trading-related expenses, including all your margin interest, on

Schedule C

- Profit or Loss from Business

. (The rest of us have to report these expenses on Schedule A, where there are limits on the amount we can deduct.)

Just be sure to use 523900, the code for "Other Financial Investment Activities," in Box B of Schedule C. That will alert the IRS you're filing as a trader. See this previous story from our

Taxes for Traders series for more tips on filing as a trader.

Can I E-File Homemade Schedules?

Regarding attachments to Schedule D, I'd like to file the 1040-PC, since the IRS can scan it, and it should result in fewer typing errors. Can I make a "see attachment" comment if I want to file a 1040-PC? -- David Hoerl


Rather than go through the tedious process of entering scores of trades into a tax software program, you obviously prefer to print out your own schedule of trades and attach it to your tax return. That's OK as far as the IRS is concerned, but you won't be able to file your tax return electronically. A detailed trade statement is not an authorized attachment for e-filing, so the IRS may just discard it. (See this previous

Tax Forum for more on attaching statements.)

By the way, if you file electronically, you're limited to reporting 97 short-term trades and 97 long-term trades on an e-filed Schedule D.

The 1040-PC is basically a condensed version of the

Form 1040

-- U.S. Individual Income Tax Return

that expedites processing because, in theory, it can be quickly scanned. But here's a secret: The IRS never created a system to read these condensed forms. So don't bother. Just use the regular Form 1040, write "see attached schedule" on your Schedule D, attach your schedules and drop it all in the mail.

The IRS has proposed allowing more trades on an e-filed Schedule D for next year, says Eddie Feinstein, vice president of electronic services at

H&R Block


Message Board Transcript

Special thanks to Martin Nissenbaum, national director of personal income tax planning at

Ernst & Young

, who answered loads of questions on the Tax Forum message board Wednesday afternoon. If you didn't get a chance to stop by, check out the


Less Time for Taxes4Less

If you plan to use the

live-preparer option on, midnight Friday is your deadline. "But that's only assuming we don't need any additional information," says Russell Gottlich, co-founder of the site.

The live-preparer option calls for customers to input their tax information into an online questionnaire. Live preparers then turn that information into a finished tax return, calling you for additional details, if necessary. It's those extra details that can prolong the process and possibly delay the filing of your return beyond the deadline.

And although there's no mention of this on the site, the last day for the "shoe box" option -- which allows you to stuff your tax paperwork into a shoe box and mail it off to the company -- was last Monday.

What happens if you put your shoe box in the mail on Tuesday? "We won't guarantee it will be completed in time, but it's not impossible," says Gottlich.

For more deadlines from the online tax-preparation sites, come back for Saturday's Tax Forum.

Send your questions and comments to, and please include your full name. Tax Forum appears daily through April 17.

TSC Tax Forum aims to provide general tax information. It cannot and does not attempt to provide individual tax advice. All readers are urged to consult with an accountant as needed about their individual circumstances.

As originally published, this story contained an error. Please see

Corrections and Clarifications