Read FOREX AND TAX TREATMENT for our latest forex tax info.

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Hi, one of the key points for "trader" vs "investor" is that the filer primarily trades something rather than holding something for dividends or capital gain. What about the case of having a forex account (like FXCM), at around 20% of the filer's net worth, used for frequent trading, with the remaining 80% of net worth in cash, interest-bearing accounts or dividend-paying stocks?

In this scenario, the forex account would be frequent trading, providing most of the filer's monthly income, but would the interest and dividends disqualify the filer from "trader" status? In this scenario, assume the forex trading generates around 10 times of the interest and dividends received monthly (eg, $4000/month forex profit, $400/ month in interest and dividends).

Thanks in advance for you comments -- you offer a lot of great advice !!

I have $20k in short term stock loss carryover into 2010 and plan to solely trade forex futures this year. I am trying to decide whether to trade via IRC 988 or IRC 1256.

If I make $50k in forex futures market in 2010 under IRC 1256, would I be able to write the $20k in STCG's against the carryover loss, then apply the remaining $30k in LTCG to my taxes?

I do not have tax trader status.

Trader tax status is more complicated than this point, which is also valid. Forex is not the typical investment with portfolio income, yet some people do hold physical currency for the long-term. Warning, in that case it's not a long-term capital gain, since physical currency is stuck in Section 988 ordinary gain or loss treatment and you can file the opt out election (capital gains election) as you can on forex.

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Correct, currency futures are Section 1256 60/40 capital gains and losses. But you can also file the Section 988 opt out election on forex and for some contracts then use Section 1256g (foreign currency contracts) - which accomplishes your goal of having capital gains to use up capital loss carryovers.

To use 1256g, the forex must be in major currencies and you can't take or make delivery of the underlying currencies. It's clear on forwards and a case can be made for spot too. Forex OTC options are barred from 60/40 treatment, but they can still be capital gains treatment.

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Hi,

I have several brokers with which I trade. Some sent a 1099B, and the others did not.

In prior years, I reported 1099B on Form 6781. I also reported the brokers that did not send a 1099 also on Form 6781 like so:

Column (a) "Form 1099-B" <broker name 1> Column (b or c) Gain or Loss Amt

Column (a) "Form 1099-B" <broker name 2> Column (b or c) Gain or Loss Amt

Column (a) <broker name 3> Gain or Loss Amt <broker name 4> Gain or Loss Amt
Column (b or c)Total Gain or Loss Amt for broker name 3 plus broker name 4

Total 3 lines

Is this correct? I did not check off any boxes at the top of Form 6781. I just reported everything in one place so to keep consistent rather than mixing some on Form 6781 and others on Form 1040, Line 21.

I did not receive any notice from the IRS at all. Am I safe? Can I do this again.

BTW, there are only 3 lines to list my brokers. I have 4 brokers, 1 broker I'm trading on their proprietary software as well as their Metatrader 4. This broker did not send a 1099B. So I have 2 amounts for 1 broker. Can I just add the 2 amounts together to get 1 total?

Was I correct in reporting everything on Form 6781? Any help is appreciated.

Mrf1962