Author: World Worst Stock Picker
Website: http://worldworststockpicker.com/2008/10/02/mark-the-market….
These days a lot of hoopla has been said about marking
assets to the market. What does that mean? I will illustrate an example of mark
to market.
Mark to market can only be done by who the IRS defines
as active traders. Mark to market is a status that is selected by the
professional trader before the beginning of the taxable year. Suppose that I owned 100
shares of GE bought at 30 dollars a share. On December 31 the price of GE is 20
dollars. Therefore, I have a paper loss of 10 dollars per share. A regular
investor cannot take the loss for taxable purposes unless he sells the shares
prior to December 31. The professional investor that selected the mark to market
status can take a taxable loss of 10 dollars per share and still hold the stock
position without electing to sell it.
How does this apply to the current financial mess? The
banks want to elect mark to market on the collaterized mortgage instruments
which normally they are not allowed to do. The problem is…
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