Quirky rule that applies when trading USO

    Posted by RichieD on 12th of Nov 2013 at 07:02 am

    Noticed that Matt mentioned USO as a possible short-term trade in last night's newsletter.  

    I just want to remind anyone who takes this trade inside a retirement account that they will be subject to receiving a K-1 and paying tax for 2013 on any gain DESPITE the fact that they are doing so inside a tax deferred account.  That's because USO is a limited partnership (LP).  

    Found this out the hard way a few year's back when I made $$$ trading USO through my retirement account at Fidelity.  Received a K-1 for the gain at end of year. When I questioned Fidelity about it, they brought to my attention a little known tax rule that supports the issuance of a K-1 in this situation and the susequent requirement to pay tax on the gain that year...even though the trade occured within a tax deferred instrument (my retirement account).

    Just thought I'd make others aware of this rule; its helpful to know if you're trading through a brokerage within a retirement account.  PS: I have no idea if the tax law has changed since my trade about 5 years ago...but I tend to doubt it.

    Use OIL

    Posted by mstrpln on 12th of Nov 2013 at 07:41 am

    Good point.   OIL ETF reports Form 1099 and is a better choice.  Chart pattern is the same as USO.

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