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Old 08-18-2011, 10:28 PM   #41
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By and large future contracts are bought and sold by professional traders and few companies using them as hedges. I am pretty sophisticated investor, and the only time I bought futures contract was in stock market simulation class for business school that was all about derivatives. Why not raise revenue by treating them the same as any other asset, if you hold the position for a year you get a long-term gain less than a short-term gain or loss?
There's no such thing as holding (most) futures contracts for a year or more. People trade the front contract, which expires quarterly. In fact, I'm not even sure there is a contract out a year from now for the big index futures (and if there is, it's way off of market price).

Unless someone is playing a long term futures options, such as a Dec 2013 oil or gold contract, it's always short-term.
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Old 08-18-2011, 10:56 PM   #42
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There's no such thing as holding (most) futures contracts for a year or more. People trade the front contract, which expires quarterly. In fact, I'm not even sure there is a contract out a year from now for the big index futures (and if there is, it's way off of market price).

Unless someone is playing a long term futures options, such as a Dec 2013 oil or gold contract, it's always short-term.
Ok I am little confused cause looking at the CME website I see plenty of contracts for gold, oil, corn, wheat and the S&P 500etc that expire in Dec 2013 or even 2014 and 2015.


So somebody who is using the contracts for hedging a future expense like airline or locking in a future price for his crop like farmer, should be entitle to get long term capital gain treatment if they held the position for more than a year. Below that they should be paying short-term capital gains which is taxed the same as wages.
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Old 08-19-2011, 08:57 AM   #43
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Ok I am little confused cause looking at the CME website I see plenty of contracts for gold, oil, corn, wheat and the S&P 500etc that expire in Dec 2013 or even 2014 and 2015.


So somebody who is using the contracts for hedging a future expense like airline or locking in a future price for his crop like farmer, should be entitle to get long term capital gain treatment if they held the position for more than a year. Below that they should be paying short-term capital gains which is taxed the same as wages.
There's no traffic for the S&P other than the near quarter. SPX Dec 12 has a bid but no trades yet. SPX Dec 13 sits at close 1089 and the market is at 1134; it hasn't traded for a while either.

Yes, hedging contracts, and in particular commodities futures, might be held long-term. I believe hedging already receives special tax treatment (more so than the 60/40 rule). At the very least, hedging can ignore mark-to-market tax rules.
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Old 08-19-2011, 02:40 PM   #44
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What Buffett fails to mention when talking about stock index futures is that the 60/40 treatment applies to losses as well, which in certain situations can be detrimental. Furthermore, he fails to mention that there is a year-end mark-to-market on an open futures position, so you can't avoid the tax if you have a gain or push it into the next year (unlike a stock where you pay no tax until you sell). All in all, IMO, the tax treatment is more fair than Buffett makes it sound.
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Old 08-19-2011, 03:07 PM   #45
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What Buffett fails to mention when talking about stock index futures is that the 60/40 treatment applies to losses as well, which in certain situations can be detrimental. Furthermore, he fails to mention that there is a year-end mark-to-market on an open futures position, so you can't avoid the tax if you have a gain or push it into the next year (unlike a stock where you pay no tax until you sell). All in all, IMO, the tax treatment is more fair than Buffett makes it sound.
Fair points. However, the fact remains the a commodity trader making $300K (I guess it is possible that some make this little) pays a lot less income tax than a doctor or bank executive making $300K. I'd argue that traders activity is far more similar to getting a paid a salary than it is investing like is (generally) done on this forum, so I'd argue that their taxes should be the same as a salaried worker.
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Old 08-19-2011, 03:27 PM   #46
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What Buffett fails to mention when talking about stock index futures is that the 60/40 treatment applies to losses as well, which in certain situations can be detrimental. Furthermore, he fails to mention that there is a year-end mark-to-market on an open futures position, so you can't avoid the tax if you have a gain or push it into the next year (unlike a stock where you pay no tax until you sell). All in all, IMO, the tax treatment is more fair than Buffett makes it sound.
He also didn't mention that any losses can be carryback losses. For example, the trader makes $300k in 2007 and loses $100k in 2008. With futures contracts, the 2007 tax return is amended to show a $200k gain. The IRS sends a check. This makes unnecessary the $3000 loss limit to earned income (of course, there might not be any earned income for a trader).
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Old 08-19-2011, 03:32 PM   #47
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I am glad that Buffet stepped up.

But his comments and those of the other CEO will not likely change the near term outcome.

Ultimately, the voters will speak in about 15 months. I believe there will be a large voter turnout.

I doubt the majority will vote for more of the same. One of the parties is going to be neutered. There will be a unification of power for the next two years.
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Old 08-19-2011, 05:00 PM   #48
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I doubt the majority will vote for more of the same. One of the parties is going to be neutered.
Naturally the majority will not vote for divided government -- for one thing, that option won't even be on the ballot.
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Old 08-19-2011, 05:07 PM   #49
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Naturally the majority will not vote for divided government -- for one thing, that option won't even be on the ballot.
You must be using a different ballot from me.

Ha
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Old 08-19-2011, 05:54 PM   #50
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You must be using a different ballot from me.
I just have to guess at what you mean by this, since there is no "divided" option on the ballot. Do you count a split ticket as a vote for divided government? And do you think we have divided government now because a majority voted split tickets in the past?
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Old 08-20-2011, 01:35 AM   #51
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I just have to guess at what you mean by this, since there is no "divided" option on the ballot. Do you count a split ticket as a vote for divided government? And do you think we have divided government now because a majority voted split tickets in the past?
If you can vote in such a way that you are voting for a president of one party and congesspeople of another, which the last time I looked you could. this attempts to achieve a divided government. I suppose if you need a "divided option", then you won't be able to do this. But I and millions of others do it all the time.

Ha
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