Taxes

A

AICN

How are losses handled for tax purposes in a futures account at the end of the year?

If I show a net loss trading futures at the end of the year, am I only allowed to carry through the maximum $3000 as with stock losses or can I carry over much more?

Thank you in advance for any and all's help!
 
You're limited to $3,000 per year in deductability for losses. If you've lost 12,000 then you can deduct 3000 a year (against ordinary income and investment gains) for the next 4 years. You can carry forward an unlimited amount of money, but can only deduct 3,000 per year.

Some people will never fully recoup their losses.
 
I have seen mentioned a trader status. Can you enlighten us as to what that is, what the eligibility is, and what the benefits are?

Thanks...
 
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.
 
OK. So say you are classified as a full-time trader then. Can you now deduct losses greater than $3000 going forward?
 
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.
 
Tech Analysis -- Thank you for all your continuing help!

OK. To follow up again. Yes. I already did elect MTM last year. So NOW do I get to take the full loss eventually?

Thank you! I appreciate it!
 
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