My tax advisor specializes in traders and told me something important you should know: if your LLC is already formed, be careful about timing of the Section 475 election. For existing taxpayers, you normally need to make the election by April 15th of the year you want it to be effective (can be with an extension filing). If you miss that deadline, you're generally stuck with capital gain/loss treatment for the year. There is a procedure for late elections with IRS consent, but it's not guaranteed. If you're looking to implement this for 2025, mark your calendar for that April deadline!

Something nobody mentioned yet - consider how Section 475 affects wash sale rules. One huge advantage of mark-to-market is you don't have to worry about wash sales anymore, which is awesome for active traders. BTW the tax benefits can be enormous. My trading losses last year were fully deductible against ordinary income (no $3k limit) with Section 475. Would've been stuck with a massive capital loss carryforward otherwise.

Try contacting your local taxpayer advocate service. They helped me bypass the whole phone nightmare

I had the exact same issue last month! The TPP phone line is absolutely swamped right now. Here's what finally worked for me: 1. **Early morning calls**: Call at exactly 7:00 AM your local time. Set multiple alarms if needed. The wait times are shortest right when they open. 2. **Local IRS office**: This was my lifesaver. Go to irs.gov/help/contact-your-local-irs-office and find your nearest Taxpayer Assistance Center. You can walk in with your ID and they'll verify you on the spot. Way faster than waiting for mail or playing phone tag. 3. **Taxpayer Advocate Service**: If you've been waiting over 30 days total, contact them. They can expedite your case and bypass some of the normal waiting periods. The verification process is frustrating but it's there to protect you from identity theft. Don't give up - you'll get through it! The in-person route saved me about 3 weeks of waiting.

Has anyone considered the implications of Section 199A QBI deduction in this scenario? I'm wondering how selling an S-corp affects your ability to claim that 20% pass-through deduction in the final year.

Great question about the NIIT exemption! As someone who went through a similar situation with my LLC taxed as S-corp last year, I can share what I learned from my tax attorney. The key is proving "material participation" in your business activities. Since you've been actively involved since 2018, you likely qualify under multiple tests: 1. **500+ hours test** - If you worked more than 500 hours per year in the business 2. **Substantially all participation** - If your participation was substantially all the participation in the activity 3. **5-of-10 years test** - Material participation in any 5 of the previous 10 years The LLC/S-corp election doesn't change the fundamental NIIT rules. What matters is your level of involvement in business operations, not the entity structure. One important detail: Make sure you have documentation of your participation hours and business activities. The IRS may want to see evidence like meeting minutes, work logs, or other records showing your active involvement. Given your $875K expected gain, this exemption could save you about $33K in NIIT (3.8% of $875K). Definitely worth getting proper documentation together before your accountant returns!

Have you considered whether it might be easier to just dissolve the S-Corp entirely? Since it's just holding investments, you could potentially move everything to a single-member LLC or even just hold the investments personally. I had a similar "dormant" S-Corp I was maintaining for years and eventually realized I was spending more on annual filing fees and tax prep than I was gaining from any tax advantages.

This is a really nuanced situation that highlights an important distinction many people miss about S-Corp reasonable compensation rules. Since your entity is truly passive with no services being performed, you're likely in good shape to take distributions without salary. The key is documentation. I'd suggest drafting corporate minutes that clearly state: (1) the corporation was formed solely as a passive investment vehicle, (2) no shareholder services are performed that would warrant compensation, and (3) all income is derived from passive investments requiring no labor or expertise. One practical tip - consider taking distributions gradually rather than all at once. This creates less of a "red flag" appearance and gives you time to see how the IRS responds to your tax filings. Also, make sure your distributions don't exceed your stock basis, as anything over basis becomes taxable as capital gains. Given the complexity and the dollar amounts involved, you might want to run this by a tax professional who specializes in S-Corp issues. They can review your specific fact pattern and help ensure you're documenting everything properly to support your position if questioned.

Has anyone mentioned the Taxpayer Advocate Service yet? They're an independent organization within the IRS that helps taxpayers resolve problems. Since you're dealing with a situation where regular IRS channels haven't resolved your issue after 2+ years, you might qualify for their help. And it's free! I used them when I had a similar issue with an ex's business tax lien that was affecting property I received in our divorce. They assigned me a specific advocate who actually called me back and helped navigate the process. You can reach them at 877-777-4778 or look up your local office.

I'm dealing with a very similar situation right now - my ex-husband had a federal tax lien that I discovered was attached to our marital home after our divorce was finalized. Like you, I was awarded the house in the settlement but had no idea the lien would follow the property. One thing I learned that might help you is to request a copy of the original Notice of Federal Tax Lien filing from the county recorder's office where your property is located. The filing date is crucial because it determines what property the lien attaches to. If the lien was filed before you received the house in the divorce, it's attached to the property. But if it was filed after the divorce decree was recorded, you might have stronger grounds for discharge. Also, when you're working on your Form 14135, make sure to include a current certified appraisal of the property. The IRS needs to see that there's enough equity to satisfy the tax debt from your ex's portion of the home's value. Don't just estimate - get professional documentation. The waiting is honestly the worst part. I've been dealing with this for 8 months now and the stress of not being able to refinance or sell is overwhelming. Hang in there - it sounds like you're taking all the right steps.