How Does the Mark-to-Market Rule Simplify or Complicate Tax Reporting for Traders?

The mark-to-market rule simplifies reporting by eliminating the need to track the actual purchase and sale dates for determining holding periods, as all contracts are deemed sold on December 31st. However, it can complicate cash flow since a trader may owe tax on unrealized gains without having closed the position and received the cash.

This annual revaluation requires careful tracking of the year-end fair market value for all open positions.