How to Report Commodities on a Tax Return

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You must disclose any profits realized from buying and selling commodities on IRS Form 1040, Schedule D.
You must disclose any profits realized from buying and selling commodities on IRS Form 1040, Schedule D.

A commodity is a physical good, such as corn or copper, which are interchangeable with other similar goods. Commodities are traded on commodities exchanges, such as the Chicago Mercantile Exchange, typically through the trading of futures contracts. Profits earned from the buying and selling of commodities contracts must be reported to the Internal Revenue Service, known as the IRS. The IRS requires that all profits derived from the buying and selling of commodities contracts must be reported as self-employment income. The proper vehicle for reporting income from commodities on a tax return is Form 1040, Schedule D.

Things You'll Need

  • IRS Form 1099B
  • IRS Form 1040, Schedule D
  • IRS Form 1040, Schedule D Instructions
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Instructions

    • 1

      Obtain IRS Form 1099B from the broker where you purchased and sold the commodities contract. Under IRS regulations, your broker must fill out a 1099B form detailing any gains or losses you have realized by buying and selling commodities contracts. Your broker will send a 1099B form to both you and the IRS. As of 2010, your broker must send you a completed 1099B form by March 1.

    • 2

      Download IRS Form 1040, Schedule D. The IRS provides a printable version of Schedule D available for download. If you are using tax preparation software or a tax preparation firm, make sure Form 1040, Schedule D is filled out.

    • 3

      Declare any profits realized from buying or selling a commodities contract on IRS Form 1040, Schedule D. If you have held the commodities contracts for less than one year, you will need to fill out Part I. If you have held the contracts for more than one year, fill out Part II. Regardless of what part you are filling out, you will need to describe the commodity, the date the commodity was acquired and sold, the purchase price, sale price, any costs incurred and whether you made a profit or loss. After disclosing all commodities bought and sold, add up all profits and losses and disclose the total on Line 16.

    • 4

      Complete Part III of Form 1040, Schedule D. If you disclose a profit on Line 16, download the Form 1040, Schedule D Instructions from the IRS website. Use the information from the 1099B received from your broker to fill out the 28% Rate Gain Worksheet and Unrecaptured Section 1250 Gain Worksheet on Page D-8 and D-9 of the Instructions. Use these totals to fill out Part III of Form 1040, Schedule D.

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