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By default, retail
FOREX traders fall under Section 988, which covers short-term foreign exchange
contracts like spot FOREX trades. 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.
Report the gains/losses in this way:
In TurboTax, open your return and follow these steps:
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