04-08-2006, 11:24 PM
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Need help for Tax Return
Can some one give me information about tax return I am a new trader in
4X market and this year I have a big loss so please tell me what form will i have to fill out for my tax return ??? I am in USA Thanks for help. 
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04-09-2006, 10:52 PM
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US residents and citizens file Form 1040 as their individual tax return. On page one of Form 1040 line 21 is Other Income. Report spot and forward forex ordinary gain or loss transactions in summary form on line 21. Except, if you elected out of IRC 988 for IRC 1256, you report forex spot and forwards on Form 6781, together with forex futures.
We show forex tax reporting in our Forex Examples Guide. http://www.greencompany.com/Traders/...mmodites.shtml
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04-13-2006, 07:05 AM
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Switching between 1256 and 988?
Hi,
2005 is my first year trading in the spot forex market. I had a loss this year and so i guess i can report it as a section 988 ordinary loss. However if i do make a profit in the future (say in 2006), can i claim 1256 treatment then? And once i start 1256 reporting, can i revert to 988 in a year that i have a loss? Or should i declare up front to the IRS before switching back? Thanks, -Raj
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04-13-2006, 04:25 PM
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Good news, you can elect out of 988 to 1256 each year or not on a global basis for the year.
Unlike IRC 475 mark to market accounting elections for business traders, you don't make an external election with the IRS and you are not stuck with the election going forward. It may look odd to the IRS if every time you have an annual spot/forward forex loss, you report ordinary loss treatment and every time you have an annual spot/forward forex gain you report 60/40 tax treatment from IRC 1256. That may appear to be cherry picking after the fact and invite questions or challenges from the IRS. You are supposed to make the election internally (in your own books and records) in advance of the trading.
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FXCM does not endorse and cannot vouch for any of the third-party content on this site Last edited by GreenTrader Tax; 04-13-2006 at 04:27 PM.
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