We had an open futures position, with a large unrealized loss, at the end of 2022. My understanding, from IRS Form 1099-B instructions, is that the broker's 1099-B should report that unrealized loss in Box 10, and my futures P/L realized on closed contracts in Box 8, and then their sum in Box 11. The result would be that only Box 11 would match the number resulting from MTM accounting. My definition of the word "realized" is that the position was closed during 2022; while "unrealized" means the position was still open at the end of 2022. But my broker, who shall remain nameless, reported a value of zero in Box 10, which I believe contradicts the large unrealized loss on an open position. My broker, in Box 8, reported a value equal to Box 11, apparently treating both boxes as requiring MTM accounting, instead of just Box 11; whereas I believe Box 8 should only include realized P/L, not MTM P/L. Broker refuses to fix the problems with boxes 8 and 10, or even to discuss it. Broker's explanation seems to be that all three boxes, 8, 10, and 11, should be based on MTM accounting; but my reading of IRS instructions makes me believe only Box 11 should report an MTM figure, not Box 8 and not Box 10. (If our 1099-B is incorrect, then it actually does matter, because we've traded mixed straddles, and made a mixed straddle election, so that my futures trades are considered parts of mixed straddles, and therefore not subject to MTM accounting; but this sentence is in parentheses, because it is not crucial to the issue I'm raising.) Can anyone, especially any tax experts or any traders experienced with trader taxes, chime in with their assessment of who is right, me or the broker? Some validation would help my efforts to persuade the broker at least to discuss the matter.
This should be the formula: (11) = (10) - (9) + (8) Check if the reported numbers agree with it. Secondly, pls explain in what way realized P/L calcs differ from MTM P/L calcs as you see it. Possibly with examples. To me they look the same.
I can't speak to your exact situation, but I know that when doing my trading taxes every year there are often a lot of discrepancies in the $ values provided by Interactive Brokers that I have to manually reconcile by matching trades (open orders/close orders) myself....I then print out all the matched lots (opening/closing trades) and send the list to the IRS with my tax statement to prove I'm not lying. Without using TradersLog software, this task would be nearly impossible.
If you are trading only futures, not sure where discrepancies could possibly come from? The futures prices are pretty much straightforward. Not sure where the broker could make a mistake.
First, let's just keep things simple by ignoring Box 9 on Form 1099-B, because it is correctly reported as zero for us this year, and because ignoring it will help focus on the real question here. My understanding of futures MTM P/L is that it consists of P/L from every futures trade, regardless of whether the trade was closed or open at year's end. And every single futures trade was either open or closed at year's end. This implies that futures MTM P/L is the sum of the realized futures P/L, consisting of futures P/L on positions closed by year's end, plus the futures unrealized P/L, consisting of P/L on futures positions still open at year's end. So "MTM P/L" = "realized P/L" + "unrealized P/L" = "Box 11" = "Box 8" + "Box 10". We had an open position, with a substantial loss, at year's end. So our value for "unrealized P/L" = "Box 10" should be non-zero. But our broker's 1099-B reports it as zero. I think this is wrong, broker says it is right. Also, I think that Box 8, the realized P/L, should be equal to Box 11 minus Box 10, which equals the total MTM P/L minus the unrealized P/L; but broker instead reports Box 8 equal to Box 11, so that both Box 8 and Box 11 equal the total MTM P/L. I think this is wrong, where as here, the unrealized P/L is non-zero; but broker says it is right.
For futures 1256 contracts, Box 11 = Box 8 - Box 9 + Box 10. Box 9 is previous year P&L. Box 10 is unrelaized P&L as of the last day of the year if you have open positions (2023 positions). I find it hard to believe any futures brokers would not have the tax reporting setup correctly, excluding any fees of course.
Even for the position closed in 2022, its P/L is still MTM P/L regardless of whether it was opened in 2022 or carried over from previous years. Since your box 9 is 0, all your positions were opened in 2022 and if they were closed in 2022 or continue into 2023 P/L calculations are still MTM. Unless you mean something else in your OP. If you opened position in 2022 and carry it over into 2023, box 10 should not be zero. If you incurred total loss in 2022, box 11 should show loss. But on the other hand you report only box 11 in taxes, and if it makes sense why bother.
m2m applies to only open positions as of the last day of the year, all others trades were closed and realized therefore not aplicable. So pull out your last day account statement and see what your open position was, and its cost basis, the debit/credit column of the last day would be the number the broker is using for the 1099.
I'm real sorry about this, but the version of my last post, which gkishot just quoted, was subsequently edited by me, to remove mistakes and to add clarity. Sorry, sorry, sorry, and especially to gkishot. So please everybody ignore gkishot's quotation of my last post, and instead look directly at my subsequently edited post.
Yes, all positions were opened in 2022, and only one was carried into 2023. I think that because of the loss on the one position carried into 2023, Box 10 should be non-zero, to show this unrealized loss. But my broker reports Box 10 as zero, and claims this is right. Who is right, me or the broker?