So you think you are a Trader....

Being a full time trader may mean different things to different people, but when it comes to taxes it is what the IRS thinks a Trader is that really matter.

Even if you make hundreds of stock-market trades a year, that doesn't automatically make you a trader -- at least in the eyes of tax collectors. And that means you wouldn't be eligible for certain breaks that traders can take.

This point is underscored by a recent Tax Court decision involving a Florida couple who formed a trading company and made more than 660 trades over two years. The court decided the couple were investors, not traders, and thus were subject to tough limits on deducting net losses and trading-related expenses.

While the Tax Court decision doesn't break new legal ground, tax analysts say it shows how difficult it can be to qualify as a trader and emphasizes the line between individual investor and professional trader. Calling yourself a trader on your tax return isn't enough, as the Tax Court decision points out. In addition to doing "substantial" trading with "continuity and regularity," the Internal Revenue Service says you must also be trying to profit from daily market price moves.

"The decision shows it's very, very difficult" to be considered a trader, says Bob Trinz, senior tax analyst at the tax and accounting business of Thomson Reuters.

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