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Hello Abhijit, No it has to be made and filed with the IRS before the
trades in question. The election isn't an IRS form it is just a
statement you file with your return. You can change it back later but
not after the trades in question have been made.
It is called an election under IRS code 988 under which you elect to
treat any foreign currency gains or losses attributable to a forward
contract, a futures contract , or option which is a capital asset in
the hands of the taxpayer and which is not a part of a straddle as a
capital gain or loss thereby electing out of the ordinary gain or loss
treatment required by IRS code 988 Section 988 of the code assumes
that any currency trades are part of a hedge and therefore taxable as
ordinary gains or losses.
You may be cofusing this election with the traders status election
which is a completely different thing.
Hope that explains it better
Roger
Friday, January 6, 2006, 3:18:49 PM, you wrote:
AD> Thanks Roger. Seems like it's a "internal" election the trader makes,
AD> mostly after the fact. That's what I read in the web. But what is not
AD> clear is, do I need to make a election & stick with it? Or can I make a
AD> different election year after year depending on if I have made money
AD> trading forex or not?
AD> Thanks!
AD> Roger Shepherd wrote:
>> Hello Abhijit,
>> Income tax treatment is only 1256 if you make a special
>> election to treat them this way and file the election with your return
>> filed prior to the actual trade. Otherwise FX trades are taxed just
>> like common stocks.
>>
>> Roger
--
Best regards,
Roger mailto:mailrs@xxxxxxxxxx
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