Answers ( 3 )

  1. The schedules all flow to the 1040 so you will fill out both.

  2. Here’s the problem. “Forex” is a generic term and covers different types of trading. Different types of trading get different treatment because they fall under different sections of the IRC.

    The IRS generally will not argue if you list forex gains/losses on form 8949, then schedule D, but any losses will be limited to $3000 per year and all gains will be short term and taxed as ordinary income.

    Foreign currency contracts (at arms length) fall under IRC 988.
    A 60/40 option is only allowed if you are trading futures contracts and fall under IRC 1256 and that’s form 6781. You do not mingle the two.

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  3. The problem is that “forex” seems to mean different things to different folks. For most cases the trader records each trade on form 8949 from which the totals flow to a ScheduleD, which in turn flows to a Form 1040. Part of the reason for the confusion is that form 8949 was new in tax year 2011. The fact that most folks giving advise about forex trading, warn about the Schedule D method limiting your losses to $3,000, should be taken as a warning that few people make money doing this enterprise*

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