Tax & regulation
What is Section 475(f) Mark-to-Market election and what are its pros and cons for day traders?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
A Section 475(f) mark-to-market election allows qualifying traders to treat gains and losses as ordinary income rather than capital gains, and exempts them from wash-sale rule restrictions.
How it works
The election also means unrealized gains and losses are recognized at year-end as if positions were sold, which can be beneficial for net losses but may increase tax on unrealized gains.
An example
A trader with TTS who elects Section 475(f) can deduct full trading losses against other ordinary income rather than being limited by the $3,000 capital loss cap.
Risk & limitations
The election must generally be made by a specific IRS deadline and is difficult to revoke; consult a tax professional before making this election given its permanence and complexity. This describes U.S. federal rules only; Canadian and other non-U.S. investors are subject to different tax/regulatory regimes (e.g., CRA rules, TFSA/RRSP treatment) and should consult a local tax professional.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.