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How to elect Mark to Market status with the IRS

IRS Pub 550 states:

How To Make the Mark-to-Market Election

To make the mark-to-market election for 2010, you must file a statement by April 15, 2010 This statement should be attached to either your 2009 individual income tax return or a request for an extension of time to file that return. The statement must include the following information.

  1. That you are making an election under section 475(f) of the Internal Revenue Code.
  2. The first tax year for which the election is effective.
  3. The trade or business for which you are making the election.

If you are not required to file a 2009 income tax return, you make the election by placing the above statement in your books and records no later than March 15, 2010. Attach a copy of the statement to your 2010 return. 

Do not file form 3115 at this time as it may cause you to lose your MTM status.

After making the election to change to the mark-to-market method of accounting, you must change your method of accounting for securities when you file your taxes for the first  year using MTM accounting. You do this by filing Form 3115 - Application for Change in Accounting Method. Form 3115 is filed the first year you file as MTM, for example: if 2010 will be your first year MTM you would send the statement of election with your 2009 return, and form 3115 would be filed with your 2010 tax return.

Form 3115 is also where you attach your section 481 adjustment - see How to report gains & losses marked to market. 

Once you make the election, it will apply to the current tax year and all later tax years, unless you get permission from IRS to revoke it. The effect of making the election is described under Mark-to-market election made, earlier.

For more details on the mark to market
election and how to make it,
see Pub. 550,
Investment Income and Expenses;
sections 475(e) and 475(f)

 Also see:
Rev. Proc. 99-17 on page 52 of
Internal Revenue Bulletin 1999-7 at
www.irs.gov/pub/irs-irbs/irb99-07.pdf.


MTM Election Deadline:
Unless you are a new taxpayer, the election must be made by the due date (not including extensions) of the tax return for the year prior to the year for which the election becomes effective. In other words, if you have not made this election by April 15 of the current tax year, then you have to wait till next year to do so.


Learn More... How to Report


Please note: This information is provided only as a general guide and is not to be taken as official IRS instructions. Armen Computing Ltd. does not make investment recommendations nor provide financial, tax or legal advice. You are solely responsible for your investment and tax reporting decisions. Please consult your tax advisor or accountant to discuss your specific situation.