09-19-2006, 11:27 AM
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Help me Greentax
greentax, i have been reading your stuff and find myself a tad confused on what happened to me in my earlier trading days.....
was this correct of my cpa to do? first year trading, i had a capital loss of about 30k, i was working a regular 9-5 job at the time.... he never told me about opting out of IRC 988, and as a result, i could only claim a 3k loss for the year... is that correct? i have never even heard of IRC 988 or the 60/40 thing from him..... what is right in this case? 
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09-19-2006, 11:39 PM
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historical case
You may have a problem here.
If you traded forex (spot and forwards contracts and not futures), you had ordinary loss treatment by default. Your CPA should have listed the net loss on Form 1040 line 21 Other Income/Loss without any limitation. Only capital losses are limited to 3k per year. If you elected out of IRC 988 for IRC 1256, then the capital loss limitations would apply. Also note you can carry back 1256 losses 3 years, but only against IRC 1256 gains (on Form 6781). You can amend tax returns that are less than 3 years old. Contact us if you need help.
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