Having a large dollar volume of stock purchases does not always make you a trader in the eyes of the IRS. in this case a businessman who had 313 transactions for over $20 million in securities during a year; but he traded only on 29% of the available days and rarely sold stock on the purchase day. His business was his primary source of income. His stock losses are capital losses that are subject to the $3,000 annual cap, according to the Tax Court. He isn’t a trader for tax purposes.
These results are typical almost by definition, I am a bit surprised by his tax preparer. A CPA???
Now, if he been better organized and structure things better the result may have been different, had he set up a corporation or LLC he would have been eligible for mark to market as well as the potential of recognizing the losses.
(Kay, TC Memo. 2011-159).