As to summarizing data for tax purposes. Is this strictly for an IRC 988 election, or can you summarize the data as well if you are filing using the 60/40 split of IRC 1256?

Hello GTT

I'm a little bit confused here. So in addition to just put in the gains/loss on line 21 of the 1040 form, we also must list all the line-by-line trades? Speaking of the trades, how would you report the various cross trades, not based in USD, for example, the CAD/JPY? In other words, although my account is in USD, when I buy the CAD/JPY, my record would read something like this:

Buy 100,000 Nov 15, 2007 CAD/JPY ....11,414,000 (yen) Debit
Sell 100,000 Nov 15, 2007 CAD/JPY.....11,439,000 (yen) Credit
Profit: $221.52

The profit/loss is automatically converted to USD. However, the transaction record is in Yen. So if I were to enter EXACTLY like the record shows, my profits would be gargantuan. That's why it would be a relief it all that is needed is to fill in the line 21 on the 1040 form


Thanks

Hello gurus,

I read all this forum and still am not clear how to report what I have. First of all I am not doing FOREX anymore and I did not have any open position as of december 2007. So, I did receive 1099-B form from my broker reporting an aggregate loss of $220 something. So, but I cannot enter a negative amount on line 21 of form 1040. I am using HR Block online tax prep software, and it only let's me input 0 or greater amount on that line. What else can I do?
Also, do I still need to do schedule D as well?

Thanks,
Andy

so anybody can respond to my question?

Thanks for the link. I just submitted this Comment to that site.

Robert A. Green, CPA said...

Calling the IRS can lead to some correct answers and also some incorrect answers. This is acknowledged by the IRS and reported in the media. Submitting questions for an official letter ruling is better.

I disagree with the conclusions made by the author above.

First of all, a forex broker is not supposed to issue a 1099 for forex. Second of all, don't just report spot forex on Schedule D; you are not entitled to do that unless you make the "capital gains election."

See our latest Forex Tax page http://www.greencompany.com/Educatio...Currency.shtml

We explain in our content how spot may be reported on Form 6781 (60/40) under a reasonable basis opinion with certain conditions.

Thanks, Robert A. Green, CPA
CEO GreenTraderTax.com

Hi Andy,

I had the same problem using their HRBlock service online. I didn't continue my filing. I just bought the software (Taxcut-Premium+State+E File) and I was able to put the negative amount on 1040 Line 21 "Other Income".

Hope that helps.

As I have pointed out every time, the forex tax rules are vague, confusing, nuanced and conflicting. Different professionals can disagree on some treatment.

But again, calling the IRS can yield different answers to the same question on different days as well.

GREENTRADER: My broker (forex.com) annoyingly sends 1099-Bs to the IRS (even though they don't have to). You state below it would be a good idea to report FX losses on Form 6781 to "match up" the amounts with the amounts reported to the IRS, and then "transfer" the amount to line 21 of 1040. How is this "transfer" effected? By simply writing in the amount on line 21? By submitting form 6781, will I be "deemed" to have made an election to opt out of section 988? The instructions to form 6781 very clearly state that any amounts reported on 6781 should be reported on Schedule D, so I'm just worried that there isn't much room to report items submitted on form 6781 on line 21.

That's why I'm thinking maybe it's just best to report on line 21 without filing Form 6781, and explaining later if the IRS asks about it. Thoughts?

We heard that the very few forex brokers that give clients a 1099 don't file that 1099 with the IRS. A curious practice, which is not appropriate in our view. Perhaps, they want to better prod a client to report this income to the IRS (not a bad intention).

If they use a 1099 to report the forex like futures (the 1099 for Section 1256 contracts), then I suggest that you report it like futures on Form 6781 (for Section 1256 contracts). Then you can add another line item directly underneath it to reverse the amount so it zeros out on Form 6781. That 2nd line shows it being transferred to line 21 of Form 1040 (if investor tax status) and Form 4797 (if trader tax status). Reporting it directly on Form 4797 should be okay too.

Even if you report it directly on line 21, just make sure to explain what happened and why in the footnote.