Commodities futures are a bet on whether a product such as orange juice, beef or wheat will rise in price. Investors take out a contract to buy or sell commodities at a preset price and date. When the date rolls around, a buy contract that lets you invest below the market price is a winner. If the market price is lower than your contract price, you lose. You report the results as a capital gain or loss.
Gains and Losses
Contracts are a zero sum game -- for every buy contract, there's also a seller. When you complete the contract transaction, you report any profits as capital gains on IRS Schedule D. Losses go on the same form. You write off losses against capital gains from other transactions. If you have a net capital loss, you deduct up to $3,000 as of 2014 -- $1,500 if married but filing separately -- from your non-capital income. You carry over the rest of the loss to next year.
Hedging transactions in commodities are recorded in your return as ordinary income or loss rather than a capital gain or loss. A hedging transaction is one you make to protect against interest rate fluctuations or price changes. You have to prove to the IRS that your investment qualifies for this exception.
- Photo Credit David De Lossy/Photodisc/Getty Images
Commodities Trading Definition
Commodities trading is a sophisticated form of investing. It is similar to stock trading but instead of buying and selling shares of...
How to Fill Out IRS Form 1099-B
IRS Form 1099-B is sent to those taxpayers who received proceeds from broker and barter exchange transactions. This article is written from...
How to Report Mileage Reimbursement Income on an Income Tax Return
Most of the time, you don't have to report mileage reimbursements as income on your tax return. But you will have to...
How to Report 1099-B Losses on Schedule D
Form 1099-B is the Internal Revenue Service form used for the reporting of brokered transactions. Form 1099-B must be reported on Form...
How to Report FOREX Losses
For tax purposes, money lost on the Foreign Exchange Market should be reported like any other stock losses or gains. Showing significant...
Tax Rules for Selling Gold Coins
Gold as an investment has become increasingly popular as prices have risen well over $1,000 per ounce. While owning gold bullion was...
Form 1099 B Instructions
Internal Revenue Service Form 1099-B documents securities transactions, such as the sale of stocks or bonds, that investors must report on their...