How are gains and losses on futures trades taxed?
A. You should consult your tax advisor or preparer to determine how your gains and losses will be taxed. If you trade for yourself or have managed futures accounts, be sure you have all Forms 1099 provided by your FCM reporting trading profits/losses on Section 1256 contracts and interest or T-Bill discounts earned available when you prepare your tax return or meet with your tax advisor. If you invested in a pool or fund the CPO will send you a Form K-1 showing your share of profits/losses and other income that should be reported to the IRS. As a general rule open positions will be marked-to-market as if the unrealized gains and losses were realized on the last day of the calendar year for individual accounts and the last day of the tax year for pools and funds. Marked-to-market unrealized gains/losses and realized gains/losses on 1256 contracts will be taxed on a 60%/40% basis as if 60% of the gains/losses are long term gains or losses and 40% are short term gains or losses.
