I got my SVXY K-1 for 2014 a few days ago (and I was able to access it online a week or so ago). Have you received your SVXY K-1 in the mail yet? I'm just curious if it turns out what I'm saying has any shred of truth to it or not.
Ok I've got my k1. And I am just starting to go over it. So far I am very confused by what I see. This time I have a number of cumulative adjustments, for all the trades I made in 2014. But there is no number in the "cumulative adjustment" column which corresponds to the "2,401" which was my 2013 current year increase. If I add up the total "cumulative adjustments" for disposed shares which were acquired in 2013 it comes to 1,767. What do you make of that? After that follows a list of adjustments for shares acquired and disposed only in 2014.
Well, I don't know what to make of that. Did you completely dispose of all shares that you bought in 2013 in 2014? Is it possible that some of the basis adjusment has not been "unlocked" yet because you haven't completely disposed the shares?
So I appear to be in the most bizarre position as regards SVXY - I haven't found anything about this on the net. In fact, it appears that basically nobody has any idea how to report K-1 trading P&L properly in their taxes, which is hilarious because these things have been around for over a decade now. But I can't imagine I'm the only one. In 2013, I made a lot of money in SVXY, which I claimed as a Section 1256 gain (as you are supposed to). I paid a lot of taxes on these gains. In 2014, I lost a lot of money in SVXY. The catch is, a lot of this money was lost being SHORT SVXY. So all of the trades from being short SVXY and buying it back were NOT reported on my K-1. My K-1 actually shows that I MADE money in SVXY because it only looks at the trades when I was long. So now I'm in the position of supposedly having made money in SVXY (which I did NOT). It makes absolutely no sense to me that trading from the long side in a K-1 would count as 1256 income but trading from the short side would just be treated as a shorting any other security. This should offset. Problem is, I'm not exactly sure how to show this. I need to show the net loss of trading SVXY in 1256 income, so I can then carry back these losses to last year and recoup the tax I paid. At the very least, there is NO way on earth it makes sense to claim that I made money in 1256 when I lost money on net trading one instrument. Anyone have any experience with this? Thanks...
The K-1 has nothing to do with your trading profits. It has to do with how the activities of the fund were distributed to you as a "partner" while you were long the security. If you are short, you are not a "partner" and thus you have no numbers in your K-1. Your trading profits are separate from your K-1, although the numbers on the K-1 can affect your cost basis. If I am reading you correctly, it sounds like you need to refile your 2013 taxes because SVXY trades should be reported on Schedule D or Form 8949, and are not Section 1256 contracts. Now the K-1 partnership may have assigned to you Section 1256 contract profit or loss, but that is entirely separate from your trading profit or loss.
Thanks for your response! So now that I've gone through my P&L more thoroughly: 1) I actually lost money on my long SVXY trades, even ignoring the time I was short. 2) Separately, I also traded VIX futures directly and lost money on them. I am reporting this as section 1256 contract P&L. 3) I report SVXY trades on my form 8949, but also report the "income" on my K-1 on form 6781 as 1256 contract P&L. On the K-1, it's Box 11, and marked with the code C: Sec. 1256 Contracts & Straddles. So the problem is: the K-1 "income"(which is completely bogus, as there is no way I made money trading SVXY any way you slice it) is offsetting my legitimate loss from trading VIX futures in my net Section 1256 P&L. This reduces the amount I can carry back to 2013. If you do the whole deal with adjusting your cost basis, then this "offsets" in the Schedule D, but does not offset the Section 1256 amount you can carry back. Taking a step back: I buy SVXY shares. That makes me a partner in a fund that shorts VIX futures. VIX futures go up. As a partner, I should participate in the fund's loss. I sell SVXY shares. Rationally, there is NO WAY that box 11 on my K-1 should be positive. There should be a Section 1256 LOSS passed through to me. Am I thinking about this right? In the future - I am just NEVER trading this awful product. Futures are just treated so much more cleanly and sensibly and the tax treatment is better (in that you can carry back losses).
I have never actually considered whether the values on the K-1 make sense. I just take them at face value. Whether or not they make sense or not doesn't make them go away (unfortunately). In your case, it appears that because of that box 11, your Section 1256 losses will be minimized (after combining your loss with the K-1 gain), but that loss will be transferred to your Schedule D. And yes, the whole K-1 partnership is extra annoying and I try to avoid it if I can.
This K-1 stuff is such a headache. I see you are suffering too. The document might be the most complicated I have ever seen. And Im not even American, I just trade American ETNs/ETFs. If im not an USA resident I can ignore it can't I?
Wish I could help you there. Do you have to file any US tax forms? If not, then probably you should be safe. I would contact a tax professional or try to get the question answered on a tax forum. A quick google search revealed nothing for me.
nope, never. beats me why they think I need such a form, if I don't even pay US taxes. It' s like it didnt occur to them the addressee was domiciled in a foreign country and my IB account doesnt show me as an US national but as a foreign one, so they wasted that money on an unnecessary form + priority mail for no reason. man, US government. now I get why you Americans complain so much. BTW I even lost money on my SVXY trade so I dont know what they expect I didnt even have capital gains on it just capital losses