Most tax software is organized around entities and forms. Alternative-investment tax isn't. It's organized around instruments and elections. The questions a fund, a family office, or an active trader brings are about what happened inside the portfolio: a repurchase eight days after a loss sale, a book of futures marked at year-end, an offsetting options position, a carried interest allocation. Each has its own section of the Code, and they interact.
Wash sales: thirty days, and wider than one account
Section 1091 disallows a loss on a sale of stock or securities when substantially identical stock or securities are acquired within thirty days before or after the sale, a sixty-one-day window in total. The disallowed loss isn't gone; it's added to the basis of the replacement position. The hard questions are at the edges: what counts as substantially identical, how the rule reaches acquisitions in related accounts, and how it interacts with year-end trading. For active portfolios, wash sale analysis is less a rule than a reconciliation project.
The §475(f) mark-to-market election
A trader in securities can elect under §475(f) to mark the trading book to market annually: gains and losses become ordinary, the wash sale rule stops applying to the marked positions, and year-end open positions are recognized. The threshold question is whether the taxpayer's activity rises to trader status at all, which is a facts-and-circumstances test the courts have shaped case by case. The second question is timing: the election must be made by a deadline tied to the prior year's return, which is why it's so often discovered too late. Whether to make it, trading ordinary treatment and simplicity against giving up capital gain rates, deserves a worked analysis, not a rule of thumb.
§1256 contracts, straddles, and short sales
Regulated futures and certain other contracts are governed by §1256: marked to market at year-end, with gains and losses treated as 60% long-term and 40% short-term regardless of holding period. Offsetting positions bring the §1092 straddle rules (loss deferral, holding-period termination, and interest capitalization) and short sales carry their own timing and character rules under §1233. The character math on a mixed book of stocks, options, futures, and swaps is exactly the kind of question that needs the actual statutory text on the desk.
Carried interest and the three-year rule
For fund managers, §1061 recharacterizes certain gains allocated to carried interests: capital gains that would be long-term under the usual one-year rule generally need a more-than-three-year holding period to keep long-term treatment. Which gains are caught, which are excepted, and how the rule applies through tiers of partnerships are recurring, and heavily fact-dependent, questions.
Built by someone who lived this
PartnertaxAI was built by a founder with a decade in alternative-investment tax compliance. These questions are the reason the product exists. The AI Tax Assistant answers them from the Code, the regulations, and rulings, with a clickable citation on every claim; upload the trade detail or the fund agreements and they're read alongside your question. See how firms use it, or bring your own book.
Shashank Sharma is the founder of Partnertax.ai, an AI tax assistant for tax professionals, built on cited IRS and Treasury sources.