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What are the tax laws regarding the day trading of agriculture futures? I realize these contract are classified as 1256 contracts, and the type of activity I am curious about would definitely fall under the IRS categorization of a trader as opposed to an investor. The specific type of trading I am curious about would not carry a position from day to day--in other words, the individual trading would not have a position from one trading day to the next. I'm not sure if this affects how the relevant taxes would be filed, but there would be no positions to report at the end of the tax period.

Most of expenses incurred from this type of activity would be general overhead (exchange fees, data feed costs, software costs, office rental, etc.). All income generated would be from the profits received from day-trading (part of which would sitting in the margin account of the clearing firm). Would withdrawing money from the margin account affect how the income is taxed (i.e., is the money taxed only after it is withdrawn)?

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This is the only question that I see that you didn't answer yourself:

Would withdrawing money from the margin account affect how the income is taxed (i.e., is the money taxed only after it is withdrawn)?

The answer to this is "no." The tax is the same whether or not you withdraw money from your margin account.

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  • Ah, I see. I'm not too familiar with tax laws in general--I was wondering if someone could provide me with some more details (i.e. if any of those expenses listed could be exempt from taxation, etc). That said, I appreciate your answer.
    – npp1993
    Nov 28, 2015 at 3:52

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