Forex tax question

Discussion in 'Forex' started by jokeysmurf, Nov 24, 2008.

  1. Haven't been able to get a clear answer on this question and attempts at researching this have led to more confusion.

    Given the following scenario I'd like to know what tax liabilities there are.

    You start with a flat account. You open up a position in EUR/USD, for 50k. You then increase it another 50k. Then decrease it 50k, and then close it out. You make $100.

    You then repeat the same thing, but lose $150.

    Both sets of positions are opened and closed on a single day.

    So at the end of the year (you've only had those two positions, and 8 trades) you are net -$50.00.

    Is there any scenario where your tax liability is to pay capital gains on the $100 you made, despite losing $150 later on? I know there is the 989 form and the 1256 form, putting aside the confusion of which to use, is there any case where despite the fact that you are net negative for the year, that you need to pay taxes on that winning position?

    Keep in mind this is all for the same currency pair. I'm not asking if losses in one currency pair offset gains in another, although I'm not sure if that would make a difference in the answer.

  2. I'm curious. I've heard FX taxes are a gray area that no one really understands.

    I read on website that said you just list one line with your total profit/losses, just like in futures, and another that says you have to list every trade AND you can have to pay taxes EVEN IF YOU LOSE MONEY.

    So honestly I have no idea.
  3. Moe27


    i ran to the bahamas and the tax man found me, look up traders tax and you will find companies that can do your tax for you.