Taxes

The tax rules are totally different when it comes to futures. Your "trader" status doesn't have any effect on futures and their taxes.

The deductable limits are totally different - the $3000 rule does not apply - in fact, if you have a lot of losses this year you can file amended returns for previous years and deduct the losses from those years (assuming they were profitable).

Section 1256 contracts fall under totally different rules. Just look on the IRS website, it is very simple, far simpler than equities.
 
Originally posted by Tech Analysis
It's a mess. Buy the book "Capital Gains Minimal Taxes" and you'll have a better understanding that what I can provide. You have to essentially prove volume of trades over time, consistent trades (i.e. being in and out of the market many times a day or week as opposed to only a few trades a month or so)

When you classify as a full-time trader then your income is treated as ordinary income (Not cap gains) and you can deduct all expenses, not just the >2% that investors can take.
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No,that's wrong. You're confusing trader status with mtm.
Trader status: Futures gains and losses are 60/40 cap. Expenses are deducted on sched C

MTM, if you elect mtm by 4/15 of current year, you can reduce ordinary income by the amount of your loss. (I think it's the amount of your loss), so if you are a full time trader with mtm, where's the ordinary income gonna come from?

No mtm (with or without trader status), losses are 40 short, 60% long, and get treated like anybody else, $3000 per year
 
Originally posted by Quah
The tax rules are totally different when it comes to futures. Your "trader" status doesn't have any effect on futures and their taxes.

The deductable limits are totally different - the $3000 rule does not apply - in fact, if you have a lot of losses this year you can file amended returns for previous years and deduct the losses from those years (assuming they were profitable).

Section 1256 contracts fall under totally different rules. Just look on the IRS website, it is very simple, far simpler than equities.
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Yeah, I could be wrong about the 3000 per year. Quah is probably right, but trader status won't help you with capital losses (just expenses) and it's too late for mtm. (elect mtm if you think on or before 4/15 you will have a losing year!?!?!)
 
Originally posted by Tech Analysis
No! And here's the reason. Leave it to the IRS to figure out a way. Your income is reported in Schedule D as cap gains/losses, but your expenses are deducted on Sched C.

Therefore you're still limited to 3k a year in losses against other income or gains.

Now if you want to make the mark-to-market election you need to request that when you file the tax return, but it won't take effect until next tax year.
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yeah, that's right as I understand it, I think I was typing instead of reading. (I'm so excited, I'm finally starting to understand taxes.) Ask me anything anything at all, and I will go to IRS PUB 550 and find it for you.
 
Section 1256 contracts are already MTM. You don't have to elect that. In fact, electings MTM has no effect on Section 1256 contracts as far as I know.
 
I was referring to stocks, not futures.

It is such a damnable mess this whole thing. As for other types of income, my wife works and we also have interest income so that's what I meant by ordinary income.
 
It is most certainly a mess.

However, I find the rule about futures contracts/trading to be pretty easy - especially vs. equities/options.
 
Originally posted by Quah
Section 1256 contracts are already MTM. You don't have to elect that. In fact, electings MTM has no effect on Section 1256 contracts as far as I know.
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Yeah quah, it does. If you elect mtm, you lose the 60/40 split. Cap losses are converted to ordinary losses. Now, you can elect mtm for stocks but not futures.
 
Originally posted by profitseer
Yeah quah, it does. If you elect mtm, you lose the 60/40 split. Cap losses are converted to ordinary losses. Now, you can elect mtm for stocks but not futures.
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Are you saying it you elect MTM (which you can only do for stocks) you loses the 60/40 split on the 1256 contracts?
 
Originally posted by Tech Analysis
I was referring to stocks, not futures.

It is such a damnable mess this whole thing. As for other types of income, my wife works and we also have interest income so that's what I meant by ordinary income.
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Tell me about it. I was over at thestreet.com, and they have an expert, but the lady writing the article got mtm all mixed up.

I only started researching it because I never even heard of electing mtm. As Quah states, all futures are marked to market anyway, but electing mtm is a whole nuther thing.
 
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