Form 8886 needed when Section 988 losses >$50K in aggregate?

L

leonbaum2

I have a few dozen spot FX trades in multiple pairs with individual losses not exceeding $50K, but the sum of all losses is about $70K.

From my reading of the IRS requirements [1], it appears that individual transactions must exceed $50K. But that seems a little silly because couldn't people just split transactions to stay below that limit?

So, should I file a 8886? I don't want to file it if not needed because I'm sure it will attract audit attention, but if it turns out I did need to file it, there are some steep penalties.

[1] http://www.irs.gov/Businesses/Corporations/Requirements-for-Filing-Form-8886-Questions-and-Answers
 
leonbaum2 said:
I have a few dozen spot FX trades in multiple pairs with individual losses not exceeding $50K, but the sum of all losses is about $70K.

From my reading of the IRS requirements [1], it appears that individual transactions must exceed $50K. But that seems a little silly because couldn't people just split transactions to stay below that limit?

So, should I file a 8886? I don't want to file it if not needed because I'm sure it will attract audit attention, but if it turns out I did need to file it, there are some steep penalties.

[1] http://www.irs.gov/Businesses/Corporations/Requirements-for-Filing-Form-8886-Questions-and-Answers
More...
you need to talk to Robert Green, he posts here from time to time and has been in the tax trader accounting business a long time. Your situation sounds too complicated to settle on the internet. FX is a very special situation that even the IRS has not come up with a ruling on. Good for people that have fx profits, but bad (or good) for people that have losses and a good accountant.
 
leonbaum2 said:
I have a few dozen spot FX trades in multiple pairs with individual losses not exceeding $50K, but the sum of all losses is about $70K.

From my reading of the IRS requirements [1], it appears that individual transactions must exceed $50K. But that seems a little silly because couldn't people just split transactions to stay below that limit?

So, should I file a 8886? I don't want to file it if not needed because I'm sure it will attract audit attention, but if it turns out I did need to file it, there are some steep penalties.

[1] http://www.irs.gov/Businesses/Corporations/Requirements-for-Filing-Form-8886-Questions-and-Answers
More...
 
Robert A. Green said:
File 8886 on net forex ordinary loss over 50k. It's a simple filing and large penalties if you omit it.
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Thanks, much appreciated. Now I just need to figure out whether these losses can offset my NJ capital gains. I really need to move to a better state.. or country. :)
 
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