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Author: jalapeno Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121596  
Subject: investing vs. day trading Date: 4/6/1998 7:26 PM
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At what point does investing go beyond being a rather passive extra income producer and get viewed as an actual job (part or full time)? What is the distinction between investing and day trading for income tax deduction, gains or loss purposes?

My status as an investor (while still performing my main role as software engineer) has quickly evolved from being a passive long term investor (2 hrs per week), to long / daytrading to a current status of almost exclusively day trading (2-8 hours per day).

Investment expenses have included stock trading periodicals (IBD, WSJ), Internet online services (e.g. Internet service provider, or Quote.com realtime quotes), hardware such my home computer and modem. There is also investment expenses such as a bank loan (gotta have money to make money), margin interest and brokerage commissions.

So as a long term investor I realize that things such as borrowed money interest (margin or bank) are viewed as miscellanous investment interest and go onto Sched A, however unless I had alot of other deductions, these basically get ignored.

However operating more or less as a day trader, I view this more as a job, whereby everything I put into it (computer, research, training, interest) in an effort to produce income seems an appropriate expense as the IRS is surely going to view the resulting extra income (2K last year, up 40K this year already, looking to be 100K by year end) as fully taxable.

So my main question is, can I treat my day trading investing as a seperate business, claiming full deduction to everything that goes into help producing the extra income?
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