What are losses before disposal of an asset?

Can I claim my forex losses on line 21 of my 1040 tax return?

• Please read the entire question, as there are multiple parts to it. Thanks! I lost around $25k in 2009 trading online foreign currency at interbankfx. I also lost almost $1k playing stocks (I know..I have no future as an investor). I'm hoping to get some of that money back. I am using HRBlocks premium edition to enter the losses. I want to offset the $100k I made this year with the $25k in losses on the forex. From what I've read, I can just put a cumulative (total) amount on line 21 on my 1040 under "other income" as a negative amount. Is there a sub category that classifies this debt/loss, because I can't enter anything directly into line 21 with HRBlock "premium"? Also, will the IRS automatically assume that I am filing the loss under section 988, or do I need to select that somewhere and include some additional forms? My understanding is that is the default way to report gains/losses unless you specifically opt out of that section and tell the IRS you want to file under section 1256? Does the fact that I am claiming these big losses on the forex affect my ability to claim the $1k losses from the stocks/options trading. I'm reporting that on a line by line basis on 1099-B? I have two trading accounts. I have one that was just a normal trading account, and the other is my roth IRA. Should I also report my losses from my roth IRA under 1099-B? Here's what I "think" is correct way to file my taxes...I assume that since I should be able to claim all the stock losses under 1099-B (both regular trading account and my IRA), and I should also be able to provide a cumulative total for all of my losses from my 2009 online forex escapades on line 21 on my 1040 as a negative number (I just need the subcategory to classify this "income" under). It would effectively reduce my income by $25k and save me around $5k on my taxes I'm estimating. I would also like recommendations on anything that might help prevent an audit? I was thinking that rather than e-filing I should mail the return in, and I should include a complete summary of all the trades that I made on an excel spreadsheet. Writing down 25% of my income will no doubt raise some red flags, and the last thing I have time for is dealing with the IRS. Thanks to everyone for your responses! Thanks so much for any input!

• Answer:

  I'm no expert on forex taxation but you may find helpful answers on the DailyFX forum. There is a sub-forum setup specifically for forex taxation and Robert Green of Green Trader Tax answers questions. You may find that many of the questions already asked will help with your questions, or you can post a new question. http://forexforums.dailyfx.com/forex-tax/