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James,
The part that is unclear is your statement that 1256 contract tax
treatment applies to pros only. 1256 applies to everyone and the
IRS's concern relates to the "mixed straddle" rule which is what is
under attack NOT THE TRADERS STATUS. I work just across the street
from CBOT at the CBOE and 1256 has a huge impact because it hits the
OEX and SPX which both have a massive retail following and apparently
massive retail abuse of 1256. It is the retail abuse that is most
likely raising the IRS's interest.
"James F. Mazzulla" wrote:
> There's nothing "wrong" or unclear with the letter. It was
> written by Tom Donovan, the Pres and CEO of the CBOT.
>
> If the legislation passes, 60/40 treatment will most
> definitely =not= apply to every user. It will be revoked
> with respect to those who are deemed "professional" futures
> traders. Currently, these traders report their gains (or
> losses) on form 6781, Part I. 60% are treated as LTCG (or
> loss), 40% are treated as STCG (or loss); the amounts are
> transferred to Schedule D and taxed accordingly (i.e. =not=
> as ordinary income).
>
> I don't quite understand what it is that's unclear about the
> foregoing. It's fairly simple; no more CG treatment for
> "professional" futures traders if the bill becomes law. What
> =is= unclear is whether the IRS will try to extend the term
> "professional" to include those who trade futures on a
> frequent basis (but who are not floor traders or "dealers").
>
> -----------Message-----------
> >Sometime is wrong and unclear with your letter. 60/40 treatment
> >for what are called "1256" contracts applies to EVERY user. It
> >has nothing to do with professional status. The rule never had
> >anything to do with professional status but rather was an
> >outgrowth of the "mixed straddle" rule. You also MUST mark 1256
> >contracts to market ... again without regard for status. What
> >they ae looking at is a broader definition of the "mixed
> >straddle" rule and this would apply to all tradable items ....
> >not just options and futures and it appears fairly likely
> >....because this area has gotten so much attention
> >lately.....that some changes may occur.
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