Futures , Taxes, and Mark to Market

Discussion in 'Index Futures' started by stock777, Aug 10, 2002.

  1. New to futures trading. I understand the default 40/60 long short term tax treatment of futures (not the upcoming stock futures)

    I have claimed Mark To Market for this years stock trading, and apparently this means that the futures side also gets treated as all short term gains and losses, nullifying the 40/60 advantage.

    As it turns out, a strategy I use hedges stock against eminis, and the gain/loss distribution is random. So, I don't think this is going to be a problem, or a tax disadvantage.

    Anyone else have experience with futures and Mark To Market tax status?
  2. wow, 60 views and not one comment

  3. I have MTM status and trade the minis. I think you are mistaken. I have never seen anywhere, anything that states that MTM status somehow invalidates the 60/40 tax treatment of futures. But hey, if you have hard evidence, let us know.
  4. They are two separate accounts. Now, I don't know about Universal Accounts. But, what you do in your futures account is one thing, and what you do in your securities account is another thing. Futures are marked to market whether you want them to be or not. There is no choice. Which makes profitable positions which turn sour on you after Dec 31 doubly hard to stomache.
  5. stocktrader777, This year I have to get one of these accountants who specialise in futures. I went round and round about this when they changed the law in 1997 with my accountant. I legged out of a wheat spread so I could take the tax loss on one side. Next thing I know, I am scrambling around to come up with some tax money by Apr 15th to pay taxes on the profitable side of the spread which ended up being a loser anyway.
    I have had some ok accountants, but none of them knew jack about futures. And I don't know jack about taxes. So that makes for a very profitable combination for the IRS.
  6. two words:

    holy cow!
  7. stock777,

    Here is my MTM form. What do you think? I don't mention commodities, just securities, so my guess is that in the eyes of the IRS I only elected for securities.

    Internal Revenue Service Center
    Kansas City, MO 64999-0102

    Re:[name omitted]
    SSN:[social secutiry # omitted]
    Attachment to Year 2001 Form 1040

    Dear Sirs:

    This letter is being attached hereto in accordance with Revenue Procedure 99-17 sections 5.03(1) (General Procedure) and section 5.04 (required statement).

    I hereby make an election to utilize Mark to Market Accounting Treatment for my trading activities as outlined in IRC section 475(f). I qualify as a trader in securities as that term is defined in section 475(f).

    This election shall be applicable to the year 2002 tax year.

    I will file a schedule C and forms 4797 to reflect the results of my trading activities with my year 2002 tax return and utilize the mark to market accouning treatment for all transactions occuring within that tax year and thereafter for as long as I am engaged in the business of trading in securities.

    In accordance with Revenue Procedure 99-17 I will complete a form 3115 and file the same with both my year 2002 return and with the IRS national office.


    [name omitted]

    [signature omitted]

    To make a knotty issue more knotty, I no longer trade securities, just futures. I wonder if they will let me keep my MTM status if I go for another year without trading stocks?
  8. "I wonder if they will let me keep my MTM status"

    MTM election cannot be revoked, except with permission of the Administrator. (I don't think this means Baron)
  9. It can be revoked by the IRS if they feel that you don't fulfill the prerequisites for "trader" status.
    #10     Aug 21, 2002