Quote:
Originally Posted by GreenTrader Tax
If you never opted out of Section 988 into Section 1256 in a prior (open) tax year, and if you inadvertently and erroneously reported the forex transactions as capital gain or loss (60/40 or otherwise), then you can amend your tax return to fix this. Explain it in the 1040X.
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Hi GreenTrader Tax,
Thanks for your response. I did read through your lengthy but very through explanations on your website regarding 988 and 1256. In it, you discuss that you are to elect which section you want to report under BEFORE you start trading forex (which I had no clue about), rather than after-the-fact in hindsight, otherwise you will always pick the appropriate section to your advantage based on whether you had a gain or a loss. So, I never did that, so if I ammend my return, can the IRS come back to me and say that I need to prove that I elected under 988 before I started trading fx (which I have no proof of), or do I just put a note saying I inadvertently report them under cap gain/loss and I am electing under 988?
Also, do I need to have any back-up documentation? I DID receive a 1099-B in both 2007 and 2008, so they should have that already right, so I don't gather I need to provide any back-up except an explanation as to why I'm ammending my return.
Thanks in advance for any advice.
P.S. What do you mean by a prior (OPEN) tax year? <--what do you mean by "open"
