Newly2b: You asked "...but what is the difference in treatment between traders who DO NOT elect m-to-m and investors? Or is there any difference?"
The difference is where expenses are reported. For traders without the m-to-m election, expenses are reported on Schedule C. This treatment leads to "above the line deductions." Investors report expenses on Schedule A as miscellaneous itemized deductions. With miscellaneous itemized deductions, you take a 2% of AGI haircut and increase your Alternative Minimum Taxable Income.
The key to all of this recent discussion is whether you can be classified as a trader or not. Unfortunately, there are no easy answers or objective tests to determine proper classification. As with most tax law, there is black, white, and whole lotta grey in the middle.
Bob McP
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