A Trader’s Tax Deductions:

An individual trader’s expenses relating to his trade or business are usually fully deductible under IRC §162 as “above the line” items. Thus, unlike an investor, most of an individual trader’s expenses (within reason) are deducted on Schedule C rather than as itemized expenses on Schedule A.

The expenses are deductible only if they are ordinary and necessary expenses and they are directly connected with or pertain to the trade or business. An expense is “ordinary” if it is customary or accepted in the taxpayer’s business. A “necessary” expense is appropriate and helpful to the business; it doesn’t have to be indispensable or essential. Adequate records documenting your expenses should be maintained.

These expenses can include but are in no way limited to:

  • tax advice including, for example, fees paid to TraderStatus.com™
  • trading counsel
  • subscriptions to financial magazines and newspapers
  • trader guides and books
  • custodial fees
  • seminars and ongoing education (if not merely qualifying an investor to become a trader)
  • Most start-up and early organization expenses incurred after October 22, 2004 for an entity are fully deductible, rather then being amortized over 60 months as the earlier rule required. The deduction is claimed for the year the business starts, and not the year the payments are made (if made in an earlier year)
    • ○ start-up and organizational costs (paid after 10/22/04)
      • ◙ up to $5,000 maximum is deducible in the first year (through 2009)
      • ◙ up to $10,000 maximum is deducible in the first year (starting 1/1/2010)
      • ◙ any amount over $5,000/$10,000 generally must be amortized over 15 years
      • ◙ election is only allowed if tax return is not filed late
      • ◙ for items paid or incurred after 10/22/04 and before 9/9/08 the irrevocable default is to capitalize them
      • ◙ for items paid or incurred after 9/8/08 the irrevocable default is to expense them
    • ○ See IRC §195
    • ○ See IRS publication 535
  • dedicated telephone usage and long distance
  • cell phone, pager and messenger fees
  • wireless trading fees
  • cable fees
  • on-line internet services and connection fees
  • real-time quotes, charting and analysis
  • stock tip services & newsletters and news service fees
  • trader chat room fees or subscriptions
  • office rent (but not if paid to yourself)
  • office supplies, postage, bank charges and wire fees
  • certain club memberships, dues and fees
  • clerical and record keeping expenses
  • prepayments that do not extend beyond 12 months are deductible when paid, except these have some
  • limitations:
    • ○ prepaid interest
    • ○ prepaid rent
    • ○ prepaid leases
    • ○ prepaid taxes
  • wages paid to your spouse, kids, or parents for their assistance
  • deductible retirement plans, including the Single-Participant 401k on those wages (if the business is properly designed)
  • a non-deductible Roth IRA in lieu of a regularly deductible IRA

  • interest expense paid:
    • ○ on loans used for the purchase of the trader’s positions
    • ○ including, in certain circumstances, your credit card interest under the §1.163-8T general tracing rules
    • ○ on home mortgage debt if an irrevocable §1.163-10T(o)(5) election is made
    • ○ this so-called “margin interest” is generally fully deductible for active traders because it is not subject to the regular “investment interest” limitation on IRS form 4952
    • ○ passive investors in trading entities are subject to the §163(d)(1) limitation (as typically shown on IRS form 4952) update: IRS Rev Rul 2008-12 has officially agreed with this position. Further, IRS Announcement 2008-65 and IRS Rev Rul 2008-38 state that the allowable interest (typically from IRS form 4952) is deductible on Schedule E, rather than on Schedule A as was the previously held IRS position.

  • depreciation on furniture, television, computer equipment and software.
    • ○ computers & equipment 5 year life (Rev Proc 87-56)
    • ○ office furniture & fixtures 7 year life (Rev Proc 87-56)
    • ○ Depreciation Limits for Passenger Cars
    • ○ it is penny wise and pound “audit bait” foolish (or just plain ignorance) taking a deduction using other periods such as 3 year lives (which by law is basically limited to tractors and horses ( §168(e)(3))
      • ◙ the 50% bonus and 100% bonus depreciation rules that change from year-to-year for many new (not necessarily used) items of personal property. Many passenger vehicles can get a significant level of first year depreciation.

     

  • ○ up to 100% of “§179 deduction”(*1)
    • ○ computers, other equipment, software and furniture qualify.
    • ○ automobiles and SUV’s on a car chassis with unloaded GVW of 6,000 pounds and SUV’s on a truck chassis , Trucks & Vans with a loaded GVW over 6,000 pounds or SUV’s over 14,000 pounds may be eligible for §179
  • travel and automobile expense

    STANDARD MILEAGE RATES
  • auto mileage rate 2017 up to four cars at a time @ 53.5¢/mile (depreciation portion is 25¢, most of the remainder is based on insurance, repairs and fuel)
    • ○ note that the medical & moving mileage rates are 17¢/mile (based mostly on fuel cost)
    • ○ the charitable purposes mileage rate is 14¢/mile (this rate is fixed by law)
    • ○ the military rate for airplane is $1.1x and for motorcycle is 5x.0¢/mile and 17¢/mile for some other travel
  • auto mileage rate 2016 up to four cars at a time @ 54.0¢/mile (depreciation portion is 24¢, most of the remainder is based on insurance, repairs and fuel)
    • ○ note that the medical & moving mileage rates are 19¢/mile (based mostly on fuel cost)
    • ○ the charitable purposes mileage rate is 14¢/mile (this rate is fixed by law)
    • ○ the military rate for airplane is $1.17 and for motorcycle is 51.0¢/mile and 19¢/mile for some other travel
  • auto mileage rate 2015 up to four cars at a time @ 57.5¢/mile (depreciation portion is 24¢, most of the remainder is based on insurance, repairs and fuel)
    • ○ note that the medical & moving mileage rates are 23¢/mile (based mostly on fuel cost)
    • ○ the charitable purposes mileage rate is 14¢/mile (this rate is fixed by law)
  • auto mileage rate 2014 up to four cars at a time @ 56¢/mile (depreciation portion is 22¢)
    • ○ note that the medical & moving mileage rates are 23.5¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2013 up to four cars at a time @ 56.5¢/mile (depreciation portion is 23¢)
    • ○ note that the medical & moving mileage rates are 24¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2012 up to four cars at a time @ 55.5¢/mile (depreciation portion is 23¢)
    • ○ note that the medical & moving mileage rates are 23¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2011 up to four cars at a time @ 51¢/ mile thru Jun. Jul to Dec @ 55.5¢ (depreciation portion is 22¢)
    • ○ note that the medical & moving mileage rates are 19¢/mile thru Jun. Jul to Dec @ 23.5¢
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2010 up to four cars at a time @ 50¢/mile (depreciation portion is 23¢)
    • ○ note that the medical & moving mileage rates are 16.5¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2009 up to four cars at a time @ 55¢/mile (depreciation portion is 21¢)
    • ○ note that the medical & moving mileage rates are 24¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2008 up to four cars at a time @ 50.5¢/mile thru Jun. Jul to Dec @ 58.5¢ (depreciation portion is 21¢)
    • ○ note that the medical & moving mileage rates are 19¢/mile thru Jun. Jul to Dec @ 27¢
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2007 up to four cars at a time @ 48.5¢/mile
    • ○ note that the medical & moving mileage rates are 20¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2006 up to four cars at a time @ 44.5¢/mile
    • ○ note that the medical & moving mileage rates are 18¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile, there’s special rates for Katrina
  • auto mileage rate 2005 up to four cars at a time @ 40.5¢/mile thru Aug. Sept to Dec @ 48.5¢
    • ○ note that the medical & moving mileage rates are 15¢/mile thru Aug. Sept to Dec @ 22¢
    • ○ the charitable purposes mileage rate is 14¢/mile, after Aug 24th there’s special rates for Katrina
  • auto mileage rate 2004 up to four cars at a time @ 37.5¢/mile
    • ○ note that the medical & moving mileage rates are 14¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile
  • auto mileage rate 2003 one car at a time @ 36¢/mile
    • ○ note that the medical & moving mileage rates are 12¢/mile
    • ○ the charitable purposes mileage rate is 14¢/mile, A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.These and other requirements for a taxpayer to use a standard mileage rate to calculate the amount of a deductible business, moving, medical, or charitable expense are in Rev. Proc. 2010-51. Notice 2012-72 contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate planTo use the standard mileage rate, you must own or lease the car and:
      • ◙ You must not operate five or more cars at the same time, as in a fleet operation,
      • ◙ You must not have claimed a depreciation deduction for the car using any method other than straight-line,
      • ◙ You must not have claimed a Section 179 deduction on the car,
      • ◙ You must not have claimed the special depreciation allowance on the car,
      • ◙ You must not have claimed actual expenses after 1997 for a car you leased, and
      • ◙ You cannot be a rural mail carrier who received a “qualified reimbursement.”
    • ○ Further, to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use the standard mileage rate or actual expenses. However, for a car you lease, if you choose the standard mileage rate, you must use the standard mileage rate method for the entire lease period (including renewals).To use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that is business use. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.Other car expenses for parking fees and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses.

      http://www.irs.gov/taxtopics/tc510.html

 

  • home office expenses(*2)
  • maid service and cleaning
  • unreimbursed expenses (if business entity’s papers are properly documented)
  • on-premises athletic facilities (if your business entity is properly designed)
  • fully deductible medical & health care expenses or even a §501(c)(9) VEBA trust (if the plans are properly designed, as discussed in Ted Tesser’s books) – Note effective in 2006, IRS is attacking “abusive VEBA plans” that are promoted elsewhere on the internet.
  • child care and other §125 cafeteria plan deductions (if the plan is properly designed)
  • other fringe benefit plans (if the plans are properly designed)
  • 50% deductible restaurant meals had with friends who are fellow daytraders, lawyers, bankers, advisors
    • ○ was 100% deductible prior to 1987
    • ○ was 80% deductible from 1987 to 1993

  • 100% deductible food and meals
  • Meals Deductible Percentage Under §274(n)(3)
    55% for years beginning in 1998, 1999
    60% for years beginning in 2000, 2001
    65% for years beginning in 2002, 2003
    70% for years beginning in 2004, 2005
    75% for years beginning in 2006, 2007
    80% for years beginning in 2008 and thereafter
    Section 274(n)(3) provides a special rule that increases the percentage that can be deducted for meals of persons, such as truck drivers, who are subject to the hours of service limitations established by the Department of Transportation.

  • gifts to friends and 50% deductible entertainment with people who are fellow daytraders, lawyers, bankers, advisors
  • all the above with your spouse (if business purpose is properly documented and conducted)
  • 100% deductible §119 daytrader’s daily pizza and Chinese take-out wink! meals (if your c-corp or other entity is properly designed)
  • 100% deductible §119 daytrader’s monthly residence rent payments (if your c-corp is very strictly and properly designed)
  • charitable contributions

  • Other Tax Deductions and Your Small Business


Commissions paid to your brokers are capitalized and applied to reduce capital gain or increase capital loss when you sell the stock. (when you close the position)

In spite of this favorable “trade or business” treatment, a trader’s net gains are not subject to Self-Employment tax, under IRC §1402 (a)(3)(A) (but they are of course subject to the Income tax)

Taxpayers who qualify to file as Trader Status may “elect” such classification each year by a filing an appropriate tax return with the IRS.


Practical thoughts – things that support your position that you or your entity truly are in a for-profit trade or business:

  • Open a checking account for the business, separate from a personal use account
  • Obtain a credit card for the business, separate from a personal use card
  • Take a training class, attend a seminar, buy books on how to make the business profitable
  • Set up a budget for the business and/or a projection showing goals and profit ability in future years
  • Document you plans, at least annually showing goals for the year to make the business profitable

A Trader’s Responsibilities

Additional informational overview sites:
Tax Issues for “Traders” – Part II
Securities trader reporting requirements

 


Footnotes:

 


(*1) Section 179 deduction
There are slightly different rules for [Schedule C] sole proprietorships vs. for [Schedule K-1] entities filing their own separate income tax returns.  These differences primarily deal with being actively engaged in the trade or business and having enough net taxable income reportable for the year that the Section 179 expense is allowed to be fully deductible.  Excess Section 179 expense generally is deferred until the taxpayer qualifies with enough applicable net taxable income to allow for its deduction.  Unlike ordinary or bonus depreciation, Section 179 expense deduction is generally subject to being recaptured as ordinary income if the business is closed prematurely.

The owner of a trader status sole proprietorship trading business, by definition, is actively engaged and therefore a Section 179 deduction is generally allowed to the extent of applicable taxable income on the Form 1040 income tax return. (The taxpayer is actively engaged, because the owner of a trader status sole proprietorship trading business generally must be personally actively engaged and may not simply hire a manager to actively trade with discretion on behalf of the taxpayer, see Levin v U.S. & Mayer v Comr)

For an investor in a trader status entity trading business, which files its own separate income tax return such as Form 1065 or Form 1120S – it needs to be established that both the investor as well as the entity are each separately actively engaged and that each have the requisite applicable net taxable income.


Regs. § 1.179-2(c)(1) – Taxable income limitation – In general.
The aggregate cost of section 179 property elected to be expensed under section 179 that may be deducted for any taxable year may not exceed the aggregate amount of taxable income of the taxpayer for such taxable year that is derived from the active conduct by the taxpayer of any trade or business [which generally includes W-2 employee wages received, see Regs. 1.179-2(c)(6)(iv)] during the taxable year. For purposes of section 179(b)(3) and this paragraph (c), the aggregate amount of taxable income derived from the active conduct by an individual, a partnership, or an S corporation of any trade or business is computed by aggregating the net income (or loss) from all of the trades or businesses actively conducted by the individual, partnership, or S corporation during the taxable year. Items of income that are derived from the active conduct of a trade or business include section 1231 gains (or losses) from the trade or business and interest from working capital of the trade or business. Taxable income derived from the active conduct of a trade or business is computed without regard to the deduction allowable under section 179, any section 164(f) deduction, any net operating loss carryback or carryforward, and deductions suspended under any section of the Code. See paragraph (c)(6) of this section for rules on determining whether a taxpayer is engaged in the active conduct of a trade or business for this purpose.


Regs. § 1.179-2(c)(6) – Active conduct by the taxpayer of a trade or business –
(i) Trade or business. For purposes of this section and § 1.179-4(a), the term trade or business has the same meaning as in section 162 and the regulations thereunder. Thus, property held merely for the production of income or used in an activity not engaged in for profit (as described in section 183) does not qualify as section 179 property and taxable income derived from property held for the production of income or from an activity not engaged in for profit is not taken into account in determining the taxable income limitation.

(ii) Active conduct. For purposes of this section, the determination of whether a trade or business is actively conducted by the taxpayer is to be made from all the facts and circumstances and is to be applied in light of the purpose of the active conduct requirement of section 179(b)(3)(A). In the context of section 179, the purpose of the active conduct requirement is to prevent a passive investor in a trade or business from deducting section 179 expenses against taxable income derived from that trade or business. [note that this says “passive investor” – it does not say “passive activity”]  Consistent with this purpose, a taxpayer generally is considered to actively conduct a trade or business if the taxpayer meaningfully participates in the management or operations of the trade or business. Generally, a partner is considered to actively conduct a trade or business of the partnership if the partner meaningfully participates in the management or operations of the trade or business. A mere passive investor in a trade or business does not actively conduct the trade or business.


Regs. § 1.469-1T(e)(6) – Activity of trading personal property –
(i) In general. An activity of trading personal property for the account of owners of interests in the activity is not a passive activity (without regard to whether such activity is a trade or business activity (within the meaning of paragraph (e)(2) of this section)).

(ii) Personal property. For purposes of this paragraph (e)(6), the term “personal property” means personal property (within the meaning of section 1092(d), without regard to paragraph (3) thereof).

(iii) Example. The following example illustrates the application of this paragraph (e)(6):

Example.
A partnership is a trader of stocks, bonds, and other securities (within the meaning of section 1236(c)). The capital employed by the partnership in the trading activity consists of amounts contributed by the partners in exchange for their partnership interests, and funds borrowed by the partnership. The partnership derives gross income from the activity in the form of interest, dividends, and capital gains. Under these facts, the partnership is treated as conducting an activity of trading personal property for the account of its partners. Accordingly, under this paragraph (e)(6), the activity is not a passive activity.

We suggest that just because an activity is not passive (1.469-1T(e)(6)), that does not necessarily mean therefore that the investor himself is active (1.179-2(c)(6). Also see IRS Field Service Advice Number: 200111001 (below)


Regs. § 1.469-2T(c)(3)(ii)(D) – Passive activity gross income – Items of portfolio income specifically excluded –
(i)
In general. Passive activity gross income does not include portfolio income. For purposes of the preceding sentence, portfolio income includes all gross income, other than income derived in the ordinary course of a trade or business (within the meaning of paragraph (c)(3)(ii) of this section), that is attributable to –

(A) Interest (including amounts treated as interest under paragraph (e)(2)(ii) of this section, relating to certain payments to partners for the use of capital); annuities; royalties (including fees and other payments for the use of intangible property); dividends on C corporation stock; and income (including dividends) from a real estate investment trust (within the meaning of section 856), regulated investment company (within the meaning of section 851), real estate mortgage investment conduit (within the meaning of section 860D), common trust fund (within the meaning of section 584), controlled foreign corporation (within the meaning of section 957), qualified electing fund (within the meaning of section 1295(a)), or cooperative (within the meaning of section 1381(a));

(B) Dividends on S corporation stock (within the meaning of section 1368(c)(2);

(C) The disposition of property that produces income of a type described in paragraph (c)(3)(i)(A) of this section; and

(D) The disposition of property held for investment (within the meaning of section 163 (d)).

(ii) Gross income derived in the ordinary course of a trade or business. Solely for purposes of paragraph (c)(3)(i) of this section, gross income derived in the ordinary course of a trade or business includes only –

(A) Interest income on loans and investments made in the ordinary course of a trade or business of lending money;

(B) Interest on accounts receivable arising from the performance of services or the sale of property in the ordinary course of a trade or business of performing such services or selling such property, but only if credit is customarily offered to customers of the business;

(C) Income from investments made in the ordinary course of a trade or business of furnishing insurance or annuity contracts or reinsuring risks underwritten by insurance companies;

(D) Income or gain derived in the ordinary course of an activity of trading or dealing in any property if such activity constitutes a trade or business (but see paragraph (c)(3)(iii)(A) of this section);

(E) Royalties derived by the taxpayer in the ordinary course of a trade or business of licensing intangible property (within the meaning of paragraph (c)(3)(iii)(B) of this section);

(F) Amount included in the gross income of a patron of a cooperative (within the meaning of section 1381(a), without regard to paragraph (2)(A) or (C) thereof) by reason of any payment or allocation to the patron based on patronage occurring with respect to a trade or business of the patron; and

(G) Other income identified by the Commissioner as income derived by the taxpayer in the ordinary course of a trade or business.

(iii) Special rules –
(A) Income from property held for investment by dealer. For purposes of paragraph (c)(3)(i) of this section, a dealer’s income or gain from an item of property is not derived by the dealer in the ordinary course of a trade or business of dealing in such property if the dealer held the property for investment at any time before such income or gain is recognized.


IRC § 163(d)(5)(A)(ii) – Property held for investment –
(5) Property held for investment For purposes of this subsection—
(A) In general The term “property held for investment” shall include—
(i) any property which produces income of a type described in section 469(e)(1), and

(ii) any interest held by a taxpayer in an activity involving the conduct of a trade or business—
(I) which is not a passive activity, and
(II) with respect to which the taxpayer does not materially participate.


Field Service Advice Number: 200111001 Release Date: 3/16/2001 – Field Service Advice Number: 200111001 Release Date: 3/16/2001 –

CONCLUSION:
1. A partner in a “trader” partnership may claim as a trade or business
expense the section 162 expenses of the partnership.

2. A partner must treat his ordinary income or losses from a “trader”
partnership as not arising from a passive activity.

3. For noncorporate partners, section 163(d) will limit the deduction of
interest expense that is not attributable to the partnership’s trading
activity. In addition, for those noncorporate partners who do not
materially participate in the trading activity, section 163(d) also will limit
the deduction of interest expense that is attributable to the partnership’s
trading activity.


“Property held for investment” includes any property that produces
income of a type described in section 469(e)(1). I.R.C. § 163(d)(5)(A)(i).* Section
469(e)(1) income includes gross income from interest, dividends, annuities, or
royalties (not derived in the ordinary course of a trade or business), as well as gain
or loss from the disposition (not in the ordinary course of business) of property that
produce income of that type. A trader generates income of this type in the ordinary
course of business. Treas. Reg. § 1.469-2T(c)(3)(ii)(D).  See also, More v.
Commissioner, 115 T.C. No. 9 (2000); Rev. Rul. 93-68, 1993-2 C.B. 72.

* “Property held for investment” also includes any interest held by a taxpayer in an
activity involving the conduct of a trade or business that is not a passive activity and
with respect to which the taxpayer does not materially participate. I.R.C. § 163(d)(5)(A)(ii).


As has been indicated, due to the special rule of Treas. Reg. § 1.469-1T(e)(6),
T’s trading activity is treated as a nonpassive activity without regard to the
degree of participation by T’s partners. Thus, partners who do not materially
participate in the trading activity will treat their interests in T’s trading activity as
property held for investment.


469(e) – Special rules for determining income or loss from a passive activity For purposes of this section –
(1) Certain income not treated as income from passive activity In determining the income or loss from any activity—
(A) In general There shall not be taken into account—
(i) any—
(I) gross income from interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business,
(II) expenses (other than interest) which are clearly and directly allocable to such gross income, and
(III) interest expense properly allocable to such gross income, and

(ii) gain or loss not derived in the ordinary course of a trade or business which is attributable to the disposition of property—
(I) producing income of a type described in clause (i), or
(II) held for investment.

For purposes of clause (ii), any interest in a passive activity shall not be treated as property held for investment.




(*2) Deduction for Business Use of Your Home

One provision of the 1997 tax act, which was delayed to be effective for years after 1998, greatly relaxes the rules that must be met in order to deduct business use of your home.

A major change is the elimination of the rule that required the office be your “principal place of business” – the place where you meet with customers or the place where you generate most of your income. That is not the current requirement.

The new rule is a simple test requires that the use of the office be an “ordinary and necessary” expense for the business and, unless this is the only fixed location of the business, it must be the only place available where you can perform the necessary “administrative or managerial” functions of the business.

Note that this does not change the requirement that the office must be used “totally and exclusively” for the business, and have no other use whatsoever. This is very strictly interpreted, and any degree of non-business use will disqualify the office. (Theoretically, if you have your computer in your home office, and sometimes use it to track personal investments, surf the web, or play an occasional game that can cause you to lose all deductions for use of the home office for the year.)

Also, if the use of the office is as an employee, that use must clearly be solely for your employer’s convenience, not yours. If you are provided a suitable place to work by your employer (even if that means a 25 mile drive to the office in the middle of the night, when you are on-call to return customer emergency calls), that precludes you from claiming deductions for use of your home.

Note that, if your office in home qualifies for a deduction under the revised laws, it can be considered a “place of business” for determining your deductible business mileage, therefore it would not be non-deductible commuting.

The office in the home deduction generally is limited to an amount not to exceed your trading profits less your trading expenses. The excess office in the home deduction may be carried forward to be used in the following year(s).

Pass-thru entity unreimbursed expenses require proper documentation and must have no waived right for reimbursement.