Is Stock Trading Considered Employment?

Q: Is someone considered "working" if he JUST buys and sells stocks? If Joe buys shares of AOL, and makes a profit selling shares of AOL in 1998, is he considered employed? ...and if you say yes, what if he loses money that year on the trade? Is this a job according to US TAX laws? Would Joe be able to take out an IRA if he just traded stocks? <---Maybe this question can help to get an answer. If joe had a bad back, or was blind and in a wheel chair; and, on disablity; would his trading stocks put him at risk of loosing his disability payments because, he would be considered working?

A: The IRS has two definitions for people who buy and sell stocks: "Traders"
and "Investors." You would be considered a trader if you show a large volume
of trades on a consistant basis. Buying 100 shares of AOL today and selling
it 3 months from now, if that were the only trade you made, will not make
you a trader. Traders generally take all,

or most, of their earnings short
term. I would guess that if the IRS considers you a trader, it would consider
you employed. It should anyway since they tax you at the regular earned
income rate for short-term gains.

These are the type of questions that you should ask a professional
financial planner and/or tax accountant. Free tax advice from stranger is
often far more costly than paying a qualified professional to help you
out.

Not so sure on that. If he was considered employed, he would be able to
start some sort of retirement plan, have business deductions, etc., etc.
Don't think the IRS would take kindly to that.