forex gains and losses for partnership account

[Hyo]

Hi. 

I have a question regards to forex gains on partnership account. Since forex gains and losses are ordinary income by default, how do I report on partnership(1065, k-1) ?

thank you 

[Anonymous_ · Accepted solution]

You will have to enter the transactions (or a summary) in Forms Mode.

For trades that default to Section 988, enter on page 4 of Form 1065 under Line 11 (at the bottom under "Type" enter "A" for the code, a description, and an amount.

For 1256 contracts, click the Open Form icon, open and complete Form 6781.

[Hyo]

Thank you for the response,

Considering I dont have any other business income(only 988 forex income)

Q1. Would income section of page 1 be blank?

Q2. Where do I input trading expenses for monthly subscription fee? Or monthly software subscription fee?  (section 179 for computers, monitors, etc, what about softwares?)

Q3. page 4 line 11, what does “A” mean? 

Do I put “A forex” for type? And $xx.xx for an amount? 

Thank you

[Anonymous_]

Please forgive this question, but do you actually have a partnership or multi-member LLC? I presume that you do but just want to make sure you are not a single-member LLC.

Also presuming that this enterprise is not your trade or business such that income would be subject to self-employment tax when passed through to the partners (members), then you would not have ordinary business income.

Your Section 179 expense would have to be entered in Forms Mode (Schedule K) since your scenario is a nonstandard scenario for the 1065 module of TurboTax Business. 

The "A" is just a code that flows through to your K-1s (it is in the dropdown list under "Type"). It merely triggers the proper treatment when the partners (members) input the information from their K-1s on the personal income tax returns. If you still cannot locate that, post and let me know and I will try to include a screenshot.

[Hyo]

-Yes, my wife and I have partnership, with no one else.

-I am being GM in this partnership. 

-I also do think I qualify as a trader and not investor.

So I was able to figure out Form Mode and entered "A IRC988 (002)" and amount. (002 is trading accnt number) 

But where and how can I put expenses from trading? computer, fees, etc

I know I should leave 1065 page1 blank(both income and deduction), but fill page4 schedule K  because trading is not self-employment gain or loss. 

Thank you 

[Anonymous_]

@Hyo I have a few questions and a comment.

Do you and your wife reside in a community property state? You may be able to treat the partnership as a disregarded entity and each file a Schedule C if you elect to do so.

See https://www.irs.gov/pub/irs-drop/rp-02-69.pdf

Is there a reason you are not opting out of Section 988 treatment? Section 1256 is the standard 60/40 capital gains treatment and is typically more advantageous for profitable traders.

Your expenses, as a trader, are essentially business expenses and can be entered as such.

See https://www.irs.gov/taxtopics/tc429

[Hyo]

Thank you for all your help!