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Hi Roger,
I think the point you are missing is that Section 1256 contracts are
reported on Schedule D. If you look at Form 6781 (which is the form for
1256 contracts) it specifically directs you to report the 40/60 split on
Schedule D. Selecting Trader status does not eliminate this as an option.
You report expenses on Schedule C and your income on Schdule D.
Bill
-----Original Message-----
From: Roger L. Shepherd [mailto:mailrs@xxxxxxxxxx]
Sent: Monday, July 23, 2001 3:45 PM
To: Omega-list
Subject: Re: Tax status
This is getting deeper than I wanted to get but I will explain. If you trade
commodities or OEX options (also known at Section 1256 contracts under the
IRS rules) 40% or your gains and losses are treated as long-term and taxed
at the lower rate regardless of how long your were in the trade. But if you
elect trader status you lose this treatment for these assets.
You are correct however for capital assets, other than those listed above,
you report on schedule D and the trades are considered long or short term
based on the time period held whether or not you have elected "trader
status"
My point of view as to not wanting to elect "trader status" is primarily due
to the fact that I trade short term and only trade commodities.
By the way once you elect trader status, the election is permanent unless
you apply for a rescission.
Roger
----- Original Message -----
From: "John F. Berentson" <jberentson@xxxxxxxxxx>
To: "Omega-list" <Omega-list@xxxxxxxxxx>
Sent: Monday, July 23, 2001 1:39 PM
Subject: Re: Tax status
> I don't understand your point. Gains and losses are reported on
> Schedule D whether you elect trader status or not and are therefore
> treated consistently regardless of status. With trader status,
> trading costs (other than commissions) are reported on Schedule
> C, which therefore always shows a business loss which is
> deductible from your gross income without any floors.
>
> IMO, trader status is a big advantage just because you get the
> partial LT capital gains treatment on income but can apply 100%
> (other than entertainment) of costs.
>
>
> On 23 Jul 2001, at 9:58, Roger L. Shepherd wrote:
>
> > I exclusively trade futures on a short term basis.
> >
> > Trading futures, you are marked to market at year end for tax purposes
> > regardless of whether or not you elect "trader status".
> >
> > The biggest advantage of not making the trader status election is that
> > 40% of my gains are treated as long-term capital gains.
> >
>
>
> JFB
> NYC
>
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