Is Section 988 an ordinary income?

Except as otherwise provided in this section, any foreign currency gain or loss attributable to a section 988 transaction shall be computed separately and treated as ordinary income or loss (as the case may be).

What is a section 988 gain or loss?

IRC Section 988 is a tax regulation governing capital losses or gains on investments held in a foreign (nonfunctional) currency. A Section 988 transaction relates to Section 988(c)(1) of the Internal Revenue Code, which went into effect after Dec. 31, 1986. 1

How is Section 988 income taxed?

Section 988 taxes FOREX gains and losses like ordinary income, which is at a higher rate than the capital gains tax for most earners. An advantage of Section 988 treatment is that any amount of ordinary income can be deducted as a loss, where only $3,000 in capital gains losses can be deducted.

What is a section 988 transaction?

What is a Section 988 transaction? Generally, it is a transaction where the amount that the taxpayer is entitled to receive or required to pay is determined in a currency other than the functional currency of the taxpayer or is determined in reference to the value of one or more nonfunctional currencies.

Does section 988 apply to individuals?

In 1997, Congress made a de minimis exception to this regime for “personal transactions.” Current §988 now provides: (e) Application to individuals. (1) In general. The preceding provisions of this Section shall not apply to any Section 988 transaction entered into by an individual which is a personal transaction.

How do I report a 988 loss on 1040?

If the taxpayer is an investor, he reports that ordinary gain or loss on line 21 of Form 1040 (Other Income or Loss). If the taxpayer qualifies for trader tax status (business treatment), he reports the Section 988 ordinary gain or loss on Form 4797, Part II ordinary gain or loss.

Where do I report 988 Gain?

How do I report a section 988 loss?

How do I report a 988 loss?

How do I opt out of Section 988?

If you want to opt out of Section 988, and take your chances with Section 1256 instead, you must commence a written record that you intend to opt out. You don’t have to file anything in advance with the IRS, strangely enough. You just have to create this written documentation before you start entering trades.

Are 988 losses reportable transactions?

Yes, an individual or a trust with an IRC §165 loss that arose from a single IRC § 988 transaction of $50,000 or more in a single taxable year has a disclosure requirement.

Do you pay taxes on forex profits?

Aspiring forex traders might want to consider tax implications before getting started. Forex futures and options are 1256 contracts and taxed using the 60/40 rule, with 60% of gains or losses treated as long-term capital gains and 40% as short-term.

What are the factors of 988?

Factors of 988. Factors of 988 are 1, 2, 4, 13, 19, 26, 38, 52, 76, 247, 494, 988. So, 988 can be derived from smaller number in 6 possible ways using multiplication.

What is a 987 gain?

§ 987. treating gain or loss determined under this paragraph as ordinary income or loss, respectively, and sourcing such gain or loss by reference to the source of the income giving rise to post-1986 accumulated earnings.

What is a 988 transaction?

A 988 transaction is a transaction described in section 988(c)(1) of the Internal Revenue Code in the United States of America.