How to File Profits Generated Through Forex Trading ...

Why you should never EVER want bitcoins to become "currency" or refer to bitcoin or altcoins as "currency" EVER.

Why you should never EVER want bitcoins to become "currency" or refer to bitcoin or altcoins as "currency" EVER.
Its simple - do you want to pay 35% in taxes on trading or 15%?
from http://www.fxop.com/Forex%20Taxation.html
" By way of background, the maximum marginal federal income tax rates applicable in the U.S. are 35% for items of ordinary income and capital gains resulting from the sale of capital assets held 1 year or less (i.e., short term capital gains) and 15% for capital gains from the sale of capital assets held for more than 1 year.
In addition to these basic rules, currency traders potentially subject to two special provisions of the Internal Revenue Code. One is Section 1256 which generally applies to regulated futures contracts and provides that no matter what a taxpayer’s holding period for a futures position is, 60% of any gain recognized is treated as long term capital gain and 40% of any gain recognized is treated as short term capital gain. This is sometimes known as the 60/40 rule. As a result of application of the 60/40 rule to futures contracts, a blended 23% federal income tax rate applies to any gains. This is one of the principal advantages of trading futures over stocks. While short term stock trading will produce short term capital gains taxable at a 35% federal income tax rate; trading in futures will produce income subject to a 23% federal income tax rate regardless of how long or short the futures contract is held.
In addition to Section 1256, Section 988 of the Internal Revenue Code contains special rules governing the tax treatment of currency gains and losses. In general, Section 988 provides that gains and losses from currency trades are treated as ordinary income (and taxable at a maximum 35% federal income tax rate). There is an exception to this rule, however. Section 988 provides an exception for currency positions which are identified by election as excluded from Section 988 ordinary income treatment. If proper identification and an election is made, gains and losses from currency trading will be treated as capital gains and losses. Moreover, to the extent that the currency pair traded is traded on a U.S. futures exchange, the spot contract is subject to the special 60/40 treatment under Section 1256, which results in a 23% tax rate on gains (regardless of holding period). This important since most cash or spot currency contracts settle in two days, but are typically terminated and rolled over daily (thus preventing a long term holding period from ever developing). "
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In general, swaps are ordinary gain or loss treatment reported on line 21 “Other Income” of Form 1040 like the default treatment for forex in Section 988. Similarly like forex, you can report swaps in summary form on realized gains and losses only. Unlike with forex, you cannot file an opt-out election to treat swaps as capital gains or losses. If you have trader tax status (business ... By default, retail FOREX traders fall under Section 988, which covers short-term foreign exchange contracts like spot FOREX trades. 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 ... The taxation of forex contracts is complex, but at least it gives you options. No pun intended. Among the key decisions any forex trader must make, though, is deciding on the tax regime that will govern his or her trades. How do you want your profits or losses to be treated under the tax code? Uncle Sam gives you two options: Do you want to treat them as an ordinary gain or loss, as described ... According to the Internal Revenue Service, most dividends are "ordinary dividends" and are treated as ordinary income. "Qualified dividends," on the other hand, are treated like capital gains. To count as qualified, a dividend must meet specific criteria set by the government. The IRS advises that you assume that a dividend is ordinary unless you're told otherwise by the company or mutual fund ... Forex futures and options are 1256 contracts and taxed using the 60/40 rule, with 60% of gains or losses treated as long-term capital gains and 40% as short-term. IRS code Section 1256 treats Forex profits as either short-term or long-term capital gains. Under code Section 988, profits are treated as interest income and taxed at ordinary income tax rates ... As i know that income from Online Forex Trading may be taxed either under IRC 988 ... The general rule is that all FX transactions are treated as §988 income and given ordinary income/loss character. FX Currency Contracts that involve major currencies(see link below) must be marked to market under §1256. This does not give the contracts capital character but merely provides the timing for ... We believe that in many cases, spot forex can be treated like forex forwards, qualifying for lower 60/40 tax rates in Section 1256(g) on major currency pairs only. If you have significant trading gains on spot forex contracts, these tax rates may be very desirable. We make a case for using Section 1256(g) on spot forex transactions, with certain conditions and restrictions. It’s essential to ... By default, retail FOREX traders fall under Section 988, which covers short-term foreign exchange contracts like spot FOREX trades. 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 ... If treated like other RFCs, futures swaps are reported on Form 6781 Part I (Section 1256 contracts). These flow to Schedule D with 60/40 treatment. If you have a large capital loss carryover to ...

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Why Trading Stocks Is Horrible From a Tax Perspective

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