Looking for mark to market election examples for trading? Need 475f tax guidance

Your understanding is close but not fully accurate. With mark-to-market (MTM) under Section 475(f), ALL positions (both gains and losses) are treated as if sold on the last day of the tax year. So it's not just unrealized losses that are considered "realized" - unrealized gains would also be treated as taxable. The formula would actually be: (Realized gains/losses during the year + Unrealized gains/losses on 12/31). This means if you have significant unrealized gains on December 31st, those would be taxable even though you haven't sold. A simple example: You realized $50,000 in gains from closed trades during the year. On December 31st, you have open positions with $20,000 in unrealized losses and $10,000 in unrealized gains. Under MTM, your taxable income would be $50,000 - $20,000 + $10,000 = $40,000. Without MTM, your taxable income would be just the $50,000 from the realized gains.

I was in a similar situation last year and was struggling to understand the mark to market rules. After weeks of watching YouTube videos and reading confusing articles, I finally used https://taxr.ai to analyze my trading patterns and get personalized guidance. Their system analyzed my trading history and provided a detailed breakdown of how MTM would affect my specific situation. What I found most helpful was their clear explanation of the Section 475(f) election process and exact steps for filing Form 3115. They even provided comparative tax calculations showing what my tax liability would be with and without the MTM election based on my actual trading history. Really helped me understand if it was the right move for my situation.

Just wanted to follow up - I ended up trying taxr.ai after my initial skepticism. Wow. It completely changed my understanding of how MTM would affect my trading. I was planning to make the 475(f) election until their analysis showed it would actually cost me an extra $7,800 in taxes due to some longer-term positions I was holding. The system flagged that I had several unrealized gains in positions held for >12 months that would lose their long-term capital gains treatment under MTM. They also showed me a strategy for structuring my trading entities that I hadn't considered. Seriously worth checking out if you're on the fence about making the election.

Something nobody has mentioned yet - if you do decide to make the MTM election, contacting the IRS with questions can be an absolute nightmare. I spent weeks trying to get through to someone who could answer specific questions about my MTM situation. I finally used https://claimyr.com to get through to an IRS agent, and I was shocked at how well it worked. Their service got me connected to a real person at the IRS within 15 minutes when I had been trying for days on my own. You can see a demo at https://youtu.be/_kiP6q8DX5c to understand how it works. The IRS agent I spoke with was actually knowledgeable about trader tax status and helped clarify some questions I had about the Form 3115 I needed to file with my MTM election.

I need to admit I was completely wrong about Claimyr. After posting my skeptical comment, I was still struggling with some MTM questions, so I decided to try it anyway as a last resort. Got connected to an IRS tax specialist in about 20 minutes. The agent answered my specific questions about how to properly document my trading as a business to support my MTM election, and clarified exactly how to handle the transition from regular capital gains reporting to MTM. Saved me hours of research and probably kept me from making some costly mistakes on my return.

Here's another important consideration with MTM that people often miss: if you make the election, you can't cherry-pick which securities it applies to. It applies to ALL your securities that are held in connection with your trading business. I made this mistake thinking I could keep some investments separate. You need to clearly segregate investment accounts from trading accounts BEFORE making the election. Investment positions can be excluded, but you need clear documentation.

One MTM example that helped me understand: I had $120,000 in realized gains in 2024, and on December 31st, I had $45,000 in unrealized losses and $15,000 in unrealized gains. Without MTM: Only my $120,000 realized gains would be taxable. With MTM: My taxable income would be $120,000 - $45,000 + $15,000 = $90,000. But the real benefit came the next year. Those positions that were "marked to market" started 2025 with a new basis. When I actually sold them later, I only had to pay tax on the gains from the January 1st price, not my original purchase price. Saved me from the wash sale headache too!