Sec. 988. Treatment Of Certain Foreign Currency Transactions

USA: Forex profit - income or investment income?

I receive EITC and don’t want forex screwing it up. I can not have more than few K of investment income with this.
So, is Forex profit income or investment income?
Bonus question: We must pay tax on this. Does the 15.3% SS/Medicare self employment tax apply to Forex income?
submitted by DohDohDoe to Forex [link] [comments]

FIFO Regulations Ending in USA for Forex?

I am reading FIFO regulations have been excluded in the 2018 tax bill?
Does this mean I can finally trade like a decent human being? Does anyone know if this applies to Forex, and how soon we can expect our brokers to allow non-FIFO trades?
submitted by bewildercunt to Forex [link] [comments]

Can spot forex traders use Sec 1256 contract?

I've read a lot of material on the website Greentradertax but i wanted to see if i could get more insight on this matter here. This is where i am deriving most of my info from.
"By default, forex spot and forward contracts have Section 988 ordinary gain or loss treatment. Traders holding these forex contracts as capital assets may file an internal contemporaneous “capital gains election” pursuant to IRC § 988(a)(1)(B) to opt out of section 988 and into capital gains and loss treatment. If such an election is made, then for forex forwards — and forward-like forex contracts, including spot forex in some cases — taxpayers may use Section 1256(g) (foreign currency contract) treatment, providing it’s in major currencies for which regulated futures contracts trade on U.S. futures exchanges, and the taxpayer does not take or make delivery of the underlying currency"
https://greentradertax.com/why-do-forex-forward-dealers-issue-1099s-yet-spot-forex-brokers-do-not/
My current broker is oanda and i know they do not release any tax forms to you. I will have to use my account statement to report my taxes.
So... Can a spot Forex trader opt out of Sec988 and elect for Sec 1256 tax treatment? If so how do i do this?
submitted by DudeInSuit to Forex [link] [comments]

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Therefore, any Sec. 988 foreign currency gain or loss should be calculated using Currency B, which was the functional currency of the partnership. The proposed adjustments under the examination were determined using Currency B, resulting in foreign currency gain with respect to the loan payments for tax year ended Year One and tax periods ended Year Two and Year Three, respectively. Edit - actually found the answer in that link. katongogo is wrong. Unless you elect out of IRC 988, you can't carry your tax losses forward. "Section 988 ordinary loss treatment can be a problem if the trader doesn’t have trader tax status (business treatment) and has negative tax income. In that case, the excess forex ordinary losses are ... Forex transactions start off receiving ordinary gain or loss treatment, as dictated by Section 988 (foreign currency transactions). The excellent news is Section 988 ordinary losses offset ordinary income in full and are not subject to the $3,000 capital loss limitation — that’s a welcome relief for many new forex traders who have initial losses and offset the losses against wage and other ... Section 988 taxes FOREX gains and losses like ordinary income, which is at a higher rate than the capital gains tax for most earners. An advantage of Section 988 treatment is that any amount of ordinary income can be deducted as a loss, where only $3,000 in capital gains losses can be deducted. Section 988 gains or losses are reported on Form 6781. Report the gains/losses in this way: Federal ... That means that deducting a spot forex loss as ordinary (IRC 988) may also require a "reasonable cause" position. Yes, this seems like circular calculation reasoning. To play it safe, if you want IRC 988 ordinary gain or loss treatment on spot and/or forward forex, we suggest you consider opting out of 1256 for IRC 988 by filing an internal contemporaneous election. In all cases, if you trade ... IRC Section 988 is a tax regulation governing capital losses or gains on investments held in a foreign (nonfunctional) currency. A Section 988 transaction relates to Section 988(c)(1) of the ... Except as provided in regulations, a taxpayer may elect to treat any foreign currency gain or loss attributable to a forward contract, a futures contract, or option described in subsection (c)(1)(B)(iii) which is a capital asset in the hands of the taxpayer and which is not a part of a straddle (within the meaning of section 1092(c), without regard to paragraph (4) thereof) as capital gain or ...

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Currency Trading Tax & Regulatory Treatment

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