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Here is the performance record formula:

Ending Net Assets (ENA) minus Beginning Net Assets (BNA) minus Additionals plus Withdrawals equals Performance. Performance plus interest expense or minus interest income equals Net Forex Trading Gain or Loss. So yes, you may withdraw or add funds to your forex trading account throughout the year and keep track of those amounts.

If you elected out of IRC 988, you report the net forex trading gain or loss (marked to market at year end) on Form 6781 part I. That form breaks it down 60% long term capital gain and 40% short term capital gain and then moves over those numbers to Schedule D (where all capital gains and losses are reported).

If you did not elect out of IRC 988, you report the net forex trading gain or loss on line 21 Other Income Loss of Form 1040 - the first page of that form - the line right above Gross Income.

Consider our Commodities, Futures and Forex Examples Guide for more help. http://www.greencompany.com/Traders/Guides.shtml

Thanks.