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Jonathan Tierney
Jonathan Tierney, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 322
Experience:  Tax Accountant at Praxair, Inc.
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I traded the US Dollar ETF in 2015, but transaction was

Customer Question

I traded the US Dollar ETF in 2015, but transaction was purchased and sold within a month. Now, I received a K1 from this ETF provider and it showed I have a gain of $183 from Sec 1256 Contracts and Straddles. I only traded the ETF as stock and have a loss instead of gain.
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Submitted: 1 year ago.
Category: Tax
Expert:  Jonathan Tierney replied 1 year ago.

Hi , my name is ***** ***** I can help. The $183 gain from 1256 contracts gets reported on Form 6781 which then flows onto Schedule D as a long-term (60%) and short-term (40%) capital gain. In addition, your basis in the ETF is increased by $183, so your short-term loss on owning the ETF is increased by $183. You will actually benefit (aside from the additional paperwork involved) as 60% of the $183 is re-characterized to a long-term gain.

I hope this answers your question. Please let me know if I can clarify anything or answer any additional questions.

Thanks, Jonathan

Customer: replied 1 year ago.
I purchased an ETF called PowerShares US Dollar Bullish Fund, but sold the ETF after a few days. This transaction happened in Feb 2015. In this transaction, it showed a loss of $96. Since I didn't own this fund after selling the ETF, why do I get a long term gain still?
Expert:  Jonathan Tierney replied 1 year ago.

The fund is actually a publicly traded partnership, which means it does not have to pay tax at the entity level like a corporation would. Instead it passes its income, deductions, credit, etc to its partners and they are responsible for paying any income taxes. This can also happen when buying a regular mutual fund, such as if you buy a fund at the end of the year and the fund issues a capital gain distribution and the shareholder who bought into the fund end's up being responsible for the fund gains that could have occurred before his or her purchase.

Expert:  Jonathan Tierney replied 1 year ago.

However, since your basis increases in this instance, you actually will not have to pay any additional tax.