Reporting forex on 1040 - Page 2 - DailyFX Forex Forum

jonk1969 · #16 (**permalink**) 04-02-2007, 03:23 AM

*cough*

excuse me...bad cold

GreenTrader Tax · #17 (**permalink**) 04-03-2007, 07:53 PM

Yes, the forex tax rules are vague and IRC 988 and IRC 1256 are dueling and conflicint regulations.

See our Forex Tax content here http://www.greencompany.com/Educatio...Currency.shtml.

We advocate line 21 on Form 1040 by default under IRC 988.

jonk1969 · #18 (**permalink**) 04-03-2007, 11:33 PM

Thanks for the response.

GreenTrader Tax · #19 (**permalink**) 04-04-2007, 07:44 AM

In a prior post, someone mentioned their accountant mentioned line 21 limits a loss to 3k.

We found out why there is this confusion.

It appears that the individual is referring to line 21 of Schedule D; not line 21 of Form 1040. Big difference. Refer to line 21 of Schedule D and you will see it refers to that individual’s post above.

miek · #20 (**permalink**) 04-05-2007, 01:36 PM

If we're summarizing the amount of the gain (or unfortunately loss in my case) on Schedule D, how do we complete columns 1b - 1e, which apply to individual transactions (date acquired, date sold, sales price, cost or other basis)?

jonk1969 · #21 (**permalink**) 04-05-2007, 03:06 PM

I'm sure GTT can tell you for sure, but I've read that you just put "various" in those sections.

GreenTrader Tax · #22 (**permalink**) 04-05-2007, 09:52 PM

You need to list all line-by-line trades for securities on Schedule D.

Yes, fill out every column.

mik9701 · #23 (**permalink**) 06-09-2007, 02:25 AM

Assuming that on december 31st I have an open position, in which i have currency gains + interest gains - but I don't want to close the position - how does the IRS treat an open poistion like this.

thanks

mik

GreenTrader Tax · #24 (**permalink**) 06-16-2007, 03:46 AM

Mark to market (MTM) accounting is not required by law on forex. If you elect to be taxed like futures (elect out of IRC 988), then you probably should use MTM.

4xjunkie · #25 (**permalink**) 06-16-2007, 09:53 AM

Hello, Mr. Green. Here is another question.

Is rollover supposed to separate from original trade gain/loss and be reported in a different section from line21 of 1040?

Thanks,

GreenTrader Tax · #26 (**permalink**) 06-30-2007, 08:42 AM

As we point out on our Forex Tax page http://www.greencompany.com/Educatio...Currency.shtml, the forex tax rules are vague and widely misunderstood.

It's par for the course to call the IRS and get different phone answers from different agents on complex tax treatment questions.

Read our entire Forex Tax page and then consult with your own accountant too if you like.

Thanks.

Dexacare · #27 (**permalink**) 07-17-2007, 01:25 PM

Quote:

Originally Posted by GreenTrader Tax

1099s are a brokers responsibility with the IRS; it has nothing to do with a taxpayer.

Forex gains and losses are not supposed to be reported; same for forex interest income.

But taxpayers are supposed to report all their income, which includes forex trading gains and losses and forex account interest income.

So its no excuse to say you did not receive a 1099.

I have two different brokers. One reports my profits/ losses on a 1099B and the other does not. I understand that they should be reported as ordinary income on line 21 of a 1040 form until such time as one chooses to properly opt out of the IRC 988 rule for the IRC 1256.

I also understand that whether there be gains or losses, we should follow one of the IRC rulings for both and not switch back and forth.

Even though I have received a 1099B from one of these broker, can I still report both gains (in one year) and losses (in the next year) from that particular broker in summary form as ordinary income (IRC 988) on line 21 of the 1040 form?

Is it correct then to say that the 988 rule is the more correct 'default' ruling for spot forex trading even if a broker should send the 1099B forms and suggest these gains / losses be delt with in Sch. D under capital gains / losses?

thank you for all the good information you provide,

dexacare

GreenTrader Tax · #28 (**permalink**) 07-30-2007, 12:14 PM

Correct.

Brokers are not supposed to report Forex (spot or forwards) on Form 1099-. Yet some do.

If you receive a Form 1099-B for Forex - which is reported like futures with line 11 (on 1099-B) "Aggregate Profit and Loss" - you should first report the summarized amount on Form 6781, and next transfer that same amount to Form 1040 line 21 ordinary gain or loss treatment; providing you did not elect out of IRC 988.

Use Form 6781 first to ensure that the IRS can match your tax return to the 1099 filed with the IRS. If you don't the IRS may send you a tax notice.

The taxpayer'- elections take precedence over broker reporting; especially incorrect brokerage firm reporting.

Ivanovich · #29 (**permalink**) 08-02-2007, 01:25 PM

It's my understanding that if you trade only spot forex, you cannot elect out of the 988. Is this an accurate statement?

That being the case, the income is taxed at your normal tax rate.

Lastly, I'm not sure if I missed it, but does your firm do trader's returns? If so (I'm sure they do) then can you link to your quote sheet?

GreenTrader Tax · #30 (**permalink**) 09-25-2007, 04:01 PM

The Forex rules are vague. But we have concluded that Forex spot and forwards can elect out of IRC 988 for IRC 1256 treatment; on major currencies for which futures contracts also trade.

Learn more on our site.

Yes, preparing tax returns for traders is our main business.

Thanks.