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| Okay. Caution to the winds...never know who reads this....I'm old....can easily feign dementia.
Typically, IRS is pathetic in any effort to isolate hedging from speculation.
In the old days...quite a few of us used 'tax spread rolls'....ie. put on a spread in a volatile market. Take off the loss leg of a spread and roll into the next fiscal year. Your profit leg is already in the next fiscal year. Zip..no tax exposure. Would get a little cumbersome if you had a few years of profit as you'd end up swinging some pretty big numbers if the market did not make much of a move. Silver was a favorite. There were a few other tricks if you were tight on time and made a little bit too much money. I think it was the 1982 tax improvement act which eliminated this loophole. Having ENDured many visits and conversations with those folks....a couple of times they asked me to testify in complex cases & fortunately was always busy and unable to do such. Bottom line: they were clueless. Finally did bring a few boys on board who understood futures...but still a cloudy issue. As long as you deduct losses in markets in which you produce a crop, or can explain a legitimate cross hedge...you will be okay. Means do not try to deduct pork belly losses. If one of those boys visits & wears a gold badge....pretend you are having a heart attack and as you collapse call your lawyer. Never try to explain ANYTHING absent a knowledgeable tax lawyer.
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Hedging vs Speculating IRS VIEWPOINT
