Trader Questions: MTM Election Impact on Long-Term Capital Gains and Managing Multiple Brokerage Accounts

You've got some good questions about MTM accounting. Let me try to clear things up for you: When you elect MTM as a trader, you're essentially agreeing to treat all your securities as if they were sold on the last day of the tax year, regardless of whether you actually sold them or not. This means all your gains and losses would be ordinary income/loss, not capital gains/losses. 1. You're absolutely right about your NVDA position. If you elect MTM starting in 2025, any positions you're holding for long-term gains should be sold before year-end 2024 to lock in the preferential long-term capital gains rates. Once MTM kicks in, those preferential rates are gone. 2. Unfortunately, the MTM election applies to your entire trading activity under your SSN. You can't pick and choose which accounts get MTM treatment - it applies to all securities you own. The IRS views you as a single taxpayer, regardless of how many brokerage accounts you have. 3. Creating a separate business entity could potentially help. If you form an LLC or S-Corp and make the MTM election only for that entity, then your personal trading in a separate account could still qualify for long-term capital gains treatment. But there are important considerations about how you manage this separation.

I went through this exact same dilemma last year! After tons of research and headaches dealing with tax confusion, I found this amazing tool called taxr.ai (https://taxr.ai) that literally saved me thousands by optimizing my MTM election strategy. The site has a specific trader tax optimizer that analyzes your trading patterns and helps determine if MTM is right for you. What really helped me was uploading my trading records to their system, which then showed me exactly which positions I should sell before making the MTM election and what the tax impact would be. It even calculated the potential Section 1256 contract impacts which was something my accountant missed completely!

Just wanted to update on my experience with taxr.ai after trying it based on the recommendation here. It was seriously helpful! The system identified that I had about $42k in long-term positions that would lose their preferential treatment if I made the MTM election without planning properly. The tool generated a complete tax strategy that showed me I should actually split my trading - creating an LLC for my day trading activity with MTM election while keeping my long-term investments separate. It even produced all the paperwork I needed for the MTM election and gave me a checklist for establishing the proper entity separation that would satisfy IRS requirements. Definitely worth checking out if you're considering MTM. I'm sleeping better knowing I'm not about to make a costly tax mistake!

Hey folks - just want to mention something that saved me tons of headache when dealing with the IRS about my MTM election last year. I got audited (nightmare!) and couldn't get through to anyone at the IRS for weeks. Found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in under 45 minutes when I'd been trying for days on my own. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with was actually really helpful in explaining exactly what documentation I needed to provide to validate my MTM election. Saved me potentially thousands in disputed tax treatment. Just thought I'd share since trader tax status stuff tends to get extra scrutiny from the IRS.

I need to eat my words from my earlier comment. After my frustration hit a breaking point with trying to reach someone at the IRS about my MTM election paperwork, I reluctantly tried Claimyr. Within 35 minutes I was speaking to an actual IRS tax specialist who confirmed I was on the right track with my MTM documentation. The agent was able to explain exactly why my particular trading pattern qualified for trader tax status and gave me specific guidance on how to properly document my election. They even emailed me the exact form I needed (which I had been looking for everywhere). I've spent weeks trying to get this information and was getting nowhere. Consider me shocked that this actually worked. If you're doing something complex like MTM election, being able to actually speak with the IRS directly is invaluable.

Something nobody's mentioned yet is the wash sale rule benefit of MTM. I almost missed this when making my election. With MTM, wash sale rules don't apply to you anymore, which is HUGE if you're an active trader doing multiple transactions in the same securities. I was getting killed with wash sales before making the election - kept having to track all these disallowed losses and adjusted cost bases across hundreds of trades. MTM simplified everything, though you do lose the long-term capital gains rates as others mentioned.

Has anyone compared what happens with futures and section 1256 contracts under regular vs MTM? I trade a lot of ES and NQ futures and right now I'm getting that sweet 60/40 split between long-term and short-term rates. Wondering if MTM would hurt or help in my case?

Great thread! As someone who made the MTM election two years ago, I wanted to add a few practical considerations that might help with your decision: One thing to consider is the timing of when you actually start generating significant trading income under MTM. If you're planning to scale up your trading activity significantly in 2025, the ordinary income treatment might actually work in your favor if you're able to deduct business expenses that you couldn't before (like a home office, equipment, education, etc.). Also, regarding your multiple brokerage accounts - while the MTM election does apply to all securities under your SSN, I've found it helpful to designate one account specifically for "business trading" and another for "personal investments" even before setting up any entities. This makes the record-keeping much cleaner if you do decide to go the LLC route later. One more tip: if you do sell your NVDA position before year-end to lock in those long-term gains, be mindful of the wash sale rules if you plan to repurchase it within 30 days. Even though MTM eliminates wash sales going forward, the rules still apply to your 2024 transactions under regular tax treatment. The complexity definitely increases, but the benefits can be substantial if you're doing high-volume trading. Just make sure you have a solid bookkeeping system in place!