I've been daytrading the Nasdaq 100 tracking stock (QQQ) - Get Report off and on and am curious how the IRS treats losses incurred in doing that. Are these subject to the same 30-day wash-sale rule that applies to normal stock transactions?
-- Stephen Smith
Because shares of the QQQ trade like mutual fund shares, they also are subject to the wash-sale rule.
So if you buy QQQ shares on Monday, sell them at a loss on Tuesday, and buy them back within 30 days of the sale, your loss will be disallowed because you repurchased a "substantially identical" security.
But the loss is not gone forever. You can add the loss to the cost basis of your repurchased securities. For more on this, read our
megapiece on the wash-sale rule. For more on the tax issues of exchange-traded funds, see this
Multiple Jobs and Schedule C
This year, I will qualify as a trader in the eyes of the IRS. Through your helpful series of columns, I know that I can get around the self-employment tax by entering the code 523900 on my return, making the amount on Schedule D line 17 a negative, and then reporting that amount on Schedule C line 1. However, I also made a token amount of money (more than $600 but less than $5,000) doing some work as a free agent or independent contractor. (I made much more than that as a trader.) Where can I report this amount since I am already using Schedule C line 1 for the amount of my trading gains? If I just combined the two on that line, wouldn't that throw everything off? -- Kevin Sanders
Essentially, you have two businesses. You work as a trader and as an independent contractor. So you must prepare a separate
Schedule C -- Profit or Loss from Business -- for each business.
Then just add up your profits and/or losses from each of your Schedules Cs and plop the total on your
Form 1040 -- U.S. Individual Income Tax. In addition, use that total on
Schedule SE -- Self-Employment Tax. Your self-employment tax is based on your businesses' combined net income so you only need to fill out this form once.
Note that if you are married and you and your spouse have separate self-employed businesses, you must each file your own Schedule C and Schedule SE. Each self-employed person must file his own Schedule SE.
See our recent
Tax Forum on Schedule C for more details.
Does IRA Rollover Count in AGI?
Should my adjusted gross income include the amount that I converted from my traditional IRA? For instance, with an income of $95,000 and a converted amount of $20,000, this puts me over the amount where I can make contributions. -- Khanh Bui
To be eligible to convert your traditional IRA to a Roth IRA, your annual adjusted gross income cannot exceed $100,000. But do not include the amount you're going to convert when determining your eligibility.
Same goes for your contribution eligibility. You can contribute up to $2,000 as long as your adjusted gross income is less than $95,000 for a single person, and $150,000 for a married couple filing jointly. Your contributions amount will "phase out," or slowly decrease to zero, as your income hits $110,000 (if you're single) or $160,000 (for married couples filing jointly). For married people filing separately, your contribution phases out at $10,000 (that's not a typo).
Remember to include the rollover amount in your income when you're ready to calculate your final tax bill.
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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.