Mark-to-Market Accounting Mark-to-Market Accounting: "Mark-to-Market Accounting: Is It Right for You?
One of the most important decisions you will make as a trader is whether to elect the mark-to-market (MTM) accounting method. Although MTM is only available to traders, not investors, and does offer some significant tax advantages, it is not right for everyone. What makes this decision so important is that once you select MTM, you're stuck with it; there is no going back simply because it would be to your advantage tax-wise to do so.
Here is what you need to know about mark-to-market: how it works, advantages and disadvantages, the process to elect it, and how to separate and exempt long-term investments.
The MTM Method
Since 1997, mark-to-market accounting has enabled traders to change the tax status of their earnings from capital gains/losses to ordinary income/losses. This occurs on the last day of the year, at which time you tally all of your open holdings as if you were selling them at the market price that day (they are 'marked to market'). On January 1st, you re-tally your holdings as if you were repurchasing them at the current price. The basis of each holding is then adjusted to reflect these hypothetical gains and losses for tax purposes.
Advantages of MTM
No wash sales: MTM traders are exempt from the wash sale rule; because holdings are tallied at year's end, there is no need to account for gains or losses that might occur within the 30-day wash sale restrictions. Many traders elect MTM specifically to avoid cumbersome wash sale accounting.

Favorable tax rate: Under MTM, income is taxed at a lower rate than capital gains.

Losses are fully deductible: Because your income/losses are treated as ordinary and not capital gains/losses, you are not bound by the $3,000 capital loss limitation."  ¶ 9:26 PM