Thanks for buying my book "The Tax Guide for Traders." It covers trader tax for securities, futures, commodities and forex traders.

There are examples for forex traders in our companion "2006 GTT Guide: 2005 Tax Return Examples for Commodities, Futures & Forex/Currency Traders (Individual and Entities)" available at http://www.greencompany.com/Traders/Guides.shtml.

See updated Forex Tax content on our site at http://www.greencompany.com/Educatio...Currency.shtml

Simple Answer to your question.

If you did not elect out of IRC 988, then report your forex trading loss in summary form (the net amount) on line 21 Other Income (Loss) of Form 1040. That's the last line above Gross Income.

There is no capital loss limitation of $3,000 (from Schedule D) that applies on forex ordinary losses.

If you elected out of IRC 988, then you report the forex gains or losses the same as futures gains and losses on Form 6781 (the 60/40 form).

It's that simple. Thanks.