Forex
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07-29-2008, 01:04 AM
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Forex spot & forward contracts are taxed differently
Forex spot and forward contracts are IRC 988 foreign currency
transactions. They are reported in summary form as ordinary gains or losses on line 21 of Form 1040 (Other Income or Loss). Capital loss limitations do not apply since Schedule D is not used; so ordinary losses offset any type of income (including wages) without limitation. IRC 988 interbank forex includes spot forex, forward forex and other types of forex contracts. A trader or investor may elect out of IRC 988 for the more tax- beneficial IRC 1256 with 60/40 tax treatment. You need to make this election “internally”(within your own books and records) in advance of trading for the year. The election is notfiled with the IRS.      
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