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 $$$
trading USO through my retirement account at Fidelity.
Received a K-1 for the gain at end of year. When I questioned
Fidelity about it, they brought to my attention a little known tax
rule that supports the issuance of a K-1 in this situation and the
susequent requirement to pay tax on the gain that year...even
though the trade occured within a tax deferred instrument (my
retirement account).
Just thought I'd make others aware of this rule; its helpful to
know if you're trading through a brokerage within a retirement
account. PS: I have no idea if the tax law has changed since
my trade about 5 years ago...but I tend to doubt it.
Quirky rule that applies when trading USO
Posted by RichieD on 12th of Nov 2013 at 07:02 am
Noticed that Matt mentioned USO as a possible short-term trade in last night's newsletter.
I just want to remind anyone who takes this trade inside a retirement account that they will be subject to receiving a K-1 and paying tax for 2013 on any gain DESPITE the fact that they are doing so inside a tax deferred account. That's because USO is a limited partnership (LP).
Found this out the hard way a few year's back when I made $$$ 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.