How to Report Losses on S&P Options and Futures Trading
Be sure to join Tracy Byrnes and her guest Ted Tesser for a chat about traders' tax issues on Yahoo! They'll be chatting March 22 at 5 p.m. ET. Register for Yahoo! Chat at: chat.yahoo.com. It's free!
I am filing as a trader for the first time this April. I intend to elect to mark to market my trades at this point. I only trade S&P futures and OEX options. My first year, I made typical mistakes and have losses in excess of $3,000. If by year-end I have gains, can some of those gains be offset by last year's losses?
-- Cleavis Lyons
Cleavis,You have a few issues here. To start, you may file as a trader if you believe you meet the stringent trader requirements we've spelled out in previous stories. As a trader, you can mark to market your trades, which means you must value your holdings as though they were sold at fair market value on the last business day of the tax year. As a result, traders have the option of taking an unlimited amount of losses, which can be used to offset any income. Nontraders' losses are limited to the amount of their capital gains, plus an additional $3,000 a year. But you must plan ahead to make the mark-to-market election. If you did not make it on your 1998 tax return, you cannot mark your trades to market for 1999. If you want to mark to market your trades this year, you'll need to make that election by April 17. (See this previous story for more details.)
Send your questions and comments to firstname.lastname@example.org, and please include your full name. Tax Forum appears daily through April 17.
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