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Trader Tax Status
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GMFGator
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stranger
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Reged: 02/25/06
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Posts: 1
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Bottom Line on Using 1256 Contract Losses
#560 - 02/25/06 01:53 PM
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I am having troubling figuring out the bottom line on my ability to utilize 1256 Contract losses incurred during the 2005 tax year to offset other capital and ordinary gains during such year and during prior years. Assuming for the following that (i) I did not timely file for Mark to Market status for the 2005 year and (ii) I qualify for Trader Tax Status as a full time trader during 2005 with no other occupation and having made thousands of trades:
1. Can I use my losses on Section 1256 contracts to offset gains on stock trades during the same (2005) fiscal year?
2. Can I use my losses on Section 1256 contracts to offset gains on stock trades during the previous one or more tax years?
3. Can I use my losses on Section 1256 Contracts to offset ordinary income earned by my wife during the same tax year?
4. Can I sue my losses on Section 1256 Contracts to offset ordinary income from employment in previous tax years?
5. Can I use my losses on Section 1256 Contracts to offset other types of capital gains in previous tax years, such as gains on the sale of investment real estate?
Thanks very much.
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MF457
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stranger
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Reged: 01/11/06
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Posts: 8
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Loc: Dallas
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Re: Bottom Line on Using 1256 Contract Losses
#562 - 02/27/06 04:19 PM
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I believe you can use 1256 losses to offset all current year Capital gains, you can carryback only against other 1256 gains, and you can take the 3,000 deduction against ordinary income and carry the rest over to future years.
If any portion of your losses are Cash Foreign Exchange or perhaps Foreign Futures, the automatic 988 might allow you to deduct against ordinary income.
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