Interactive Brokers (IB) reports all reportable amounts on specific 1099 forms for each type of income. When issued (on or before January 31 of each year) you may find your forms under Report Management – Tax Forms. Often tax forms are revised we recommend that you check your 1099 forms periodically as you prepare and finalize your tax return.

Additionally, IB issues Form 2439, Notice to Shareholders of Undistributed Long-term Capital Gains to holders of regulated investment companies (RIC) or real estate investment trusts (REIT), when applicable. The issuance date of this form varies for each specific investment.

All Publications cited are Internal Revenue Service Publications available at www.IRS.gov.

• What is the purpose of the Form 1099?
• What Form 1099s will I receive?
• When will I receive my 1099 Forms?
• How do I access my 1099 Forms?
• How do I get my 1099 if I am unable to log into my Account Management Menu?
• What must I do if my 1099 form is not included in the Statements and Downloads section of my Account Management menu?
• How do the gross proceeds as reported on Form 1099B - Securities relate to gains or losses?
• What is the Realized Profit and Loss on the 1099-B for commodities transactions?
• Does the gross proceeds balance in the 1099-B for my securities account include commissions?
• Does the gross proceeds balance in the 1099-B for my securities account include equity and index option transactions?
• Does the gross proceeds balance in the 1099-B for my securities account include short sales?
• Does the gross proceeds balance in the 1099-B include sale transactions which have taken place in December, but which will not settle until January?
• What happens if I receive Form 1099-DIV that includes income that needs to be reported by other taxpayers?
• What IRS form(s) do I use to report Form 1099-DIV tax information?
• Does Interactive Brokers send the IRS a copy of my 1099s?
• Where can I find more descriptive information regarding your 1099’s?
• If I completed a W-8 form and I am not a legal resident of the United States will I receive a 1099?
• I've received a tax form that is incorrect. How can I get it corrected?
• Why did I receive a Form 1099 for the amount that I received from a deceased/divorced person's account?
• Why did I receive a Form 1099-R for a distribution from my employer's retirement plan that was rolled directly into an IRA?
• Why did I receive a Form 1099-R for my rollover from one IRA to another IRA?
• Why has "Taxable amount not determined" been checked in Form 1099-R, Box 2b despite a balance being reported in Box 2a as a "Taxable amount"?
• Why have taxes been withheld from my IRA distribution, I deposited the funds within 60 days into a new IRA/retirement account?
• What is Form 2439?
• What is Form 5498?
• I already filed my taxes and did not include information reported on Form 1099. What do I do now?
• I already filed my taxes and have received a Corrected Form 1099. What do I do now?
• How do I contact the Internal Revenue Service (IRS)?

What is the purpose of the Form 1099?
Forms 1099 are a series of US Tax information returns which report income earned such as interest, dividends, proceeds from securities and commodities sale transactions, and other reportable payments posted to your account during a calendar year. These reports, which are supplied to the IRS, provide information, which should be used in preparing your tax return. For example, dividends and interest, are reported on IRS Form 1040, U.S. Individual Income Tax Return, Schedule B. Sales transactions are to be reported on IRS Form 1040, U.S. Individual Income Tax Return, ScheduleD.

Information on reporting gains and losses, including determining the cost basis can be obtained by reading IRS Publications 544, Sales and Other Dispositions of Assets, and 551, Basis of Assets. We recommend you consult your tax professional with specific questions.

All of the IRS forms and publications referenced above are available on line at www.IRS.gov/formspubs.

What Form 1099s will I receive?
If you are a U.S. citizens, green card holder, or legal resident, you will receive one or more of the Form 1099s listed below based upon the activity which has taken place within your account over the calendar year:

IB issues 1099 forms by account and earnings type; therefore, if you have both a securities and commodities account you may receive multiple 1099s, for each account. Each 1099 will contain information showing interest earned, dividends received, substitute payments, securities/futures transactions, and tax withheld, if any, depending on the 1099. Specifically, IB issues the following types of 1099s:

Form 1099-INT: Interest Income reports interest income earned in your securities account including cash balance interest. Box 1 contains interest income, exclusive of U.S. savings bond and U.S. Treasury obligations interest. Interest from U. S. savings bonds and US Treasury obligations are reported in Box 3. If the IRS has notified us that backup income tax must be withheld on interest income in your account, this amount will be reported in Box 4.

Margin Interest paid by you is not reported to the IRS. This amount appears on your year end statement. Please consult your tax advisor to determine the tax treatment of these payments.

Form 1099 – OID: “Original Issue Discount”, reports the amortization of bond interest on discounted bonds which is taxable annually. OID is the excess of an obligation’s stated redemption price at maturity over its issue price. OID is taxable as interest over the life of the obligation. If you hold an OID obligation , generally you must include an amount of OID in your gross income each year you hold the obligation. Obligations that may have OID include bonds, debentures, notes, certificates and other evidence of indebtedness with terms of more than one year.

Box 1 contains the OID on obligations for the part of the year you owned it. Report the amount in box 1 as interest income on Schedule A of your tax return. However, depending on the type of debt instrument, the issue or acquisition date, and other factors, you may have to figure the correct amount of OID to report on your return. See IRS Publication 1212, Guide to Original Issue Discount (OID) Instruments, for detains on how to figure the correct OID. Box 2 contains other interest on OID obligations for the year, which is an amount separate from the OID. If you held the obligation the entire year, report this amount as interest income on Schedule A of your tax return. If you disposed of the obligation or acquired it from another holder during the year, see IRS Publication 550 for reporting instructions. Box 3 shows interest or principal forfeited if you withdrew the money before the maturity date of the obligation. If the IRS has notified us that backup income tax must be withheld on interest income in your account, this amount will be reported in Box 4. Box 6 shows OID on a US Treasury obligation for the part of the year you owned it. Report this amount as interest income on your federal income tax return and see IRS Publication 1212 to figure any appropriate adjustments to this amount. This OID is exempt from state and local income taxes and is NOT included in Box 1.

Form 1099-DIV: Dividend Income, reports the total dividend payments credited to your securities account for the calendar year as "Ordinary Dividends" in Box 1a. Box 1b, "Qualified Dividends", are dividends, which are included in Box 1a that MAY be eligible for reduced dividend tax rates. IB does not determine if the payments included in Box 1B have met the requirements for the lower tax rates to apply. IB only determines that they are payments which may be eligible for the lower tax rates. Please consult your tax advisor, see the form 1040/1040A instructions ,or IRS Publication 550 to determine the appropriate status of these payments. Box 2a “Total Capital Gain Distributions” reports long-term capital gain distributions from mutual and exchange traded funds. Box 6, "Foreign Tax Withheld," is foreign withholding tax that has been withheld at the source related to dividends paid on American Depository Receipts (ADR’s) or on foreign ordinary shares trading in the U.S. The country to which the tax was paid is listed in Box 7. If the IRS notified us that backup income tax must be withheld on dividends paid to your account, this amount will be reported in Box 4.

Dividends that were debited due to short positions are not reported to the IRS. Payments in lieu of dividend paid to you are reported on Form 1099 Misc. These amounts appear on your year end statement. Please consult your tax advisor to determine the tax treatment of these payments.

Form 1099B: “Proceeds from Broker and Barter Exchange” reports all proceeds received from SELL trades of securities (including short sales). This includes sell trades resulting from the exercise or assignment of stock options. The 1099B does not reflect capital gains or profit and/or loss. It is the customer’s responsibility to calculate gain or loss. Proceeds from option and futures trading are reported in Boxes 8 and 11. Commissions have been deducted from the trade proceeds reported on the 1099B. If back-up withholding has occurred on your account, it has been reported to you in Box 4.

Proceeds from single stock futures are not reported to the IRS. These amounts appear on your year end statement. Please consult your tax advisor to determine the tax treatment of these payments.

Form 1099 B – for Futures (substitute form) Reports profit or (loss) from regulated futures contracts. This includes proceeds from options (a regulated futures contract) trading. Only the aggregate profit or (loss) is reported by IB.

Single stock futures are not considered to be regulated futures contracts and therefore transactions of these financial instruments are not included.

Form 1099-MISC: "Miscellaneous Income", reports gross fee income paid to advisors and gross commissions paid to introducing brokers in Box 7. Box 8 reports substitute payments in lieu of dividends and interest. If we were notified by the IRS that back up withholding was required on your account, tax withheld is reported in Box 4.

Form 1099-R: “Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.”, this form used to report distributions made to you from your retirement accounts, including an IRA, Roth IRA, IRA Simple, or Keogh Plan. These 1099’s are issued to you directly by Principal Trust Company, the administrative manager of all IBG retirement related plans.

When will I receive my 1099 Forms?
By January 31, your 1099 Forms will be available for the immediately preceding year. We often need to correct 1099 forms as information becomes available to us we strongly recommend that you periodically check back for revisions as your prepare and finalize your tax filing.

How do I access my 1099 and 2439 Forms?
All 1099 forms, with the exception of the 1099-R and 1099-Q, are available in electronic format accessible at http://www.interactivebrokers.com under Account Management/Report Management. The 1099-R and 1099-Q, if applicable, will be sent to you directly from Principal Trust Company, the retirement account trustee, via mail. We recommend that you also print your year – end statement for reference and detail of items which are not reported to the IRS, but which may be necessary to prepare your tax return.

How do I get my tax forms if I am unable to log into my Account Management Menu?
Contact our Customer Service Department, and advise the service agent that you are not able to log into the Account Management Menu.

1. If you have your username, we will ask a series of security questions for identity verification, once the information has been verified; our customer service department will establish a temporary password in order for you to gain access.
2. If you do not have your username, we will require you to send additional information to our new accounts department in order to verify your identity. Please be advised that this process may require additional processing time to complete the verification process.

What must I do if my tax forms is not included in the Statements and Downloads section of my Account Management menu?
First, you must determine from which account you are missing your 1099 form. A separate 1099s are issued for Securities and Commodities accounts. Retirement account and educational savings account 1099’s are sent to you by mail, if applicable. If you are missing the securities Form 1099, the futures Form 1099, , or both; verify that you sold shares of stock during the previous tax year for equities and/or verify that you bought or sold futures contracts during that same period or that you received an interest (including interest on free cash) or dividend payment in an account. Once you have reviewed your account activity from the previous tax year, and, you have determined that you should have received a 1099 for an account, please contact our customer service department with specific details of transactions, including the name of the security, number of shares/contracts, and the trade date. We will research the issue and will advise you once we have concluded our investigation.

How do the gross proceeds as reported on Form 1099B - Securities relate to gains or losses?
Gross proceeds, alone, are not indicative of whether an overall gain or loss was realized from a securities transaction. Gross proceeds report only the sale or maturity of a capital asset, which is reportable to the IRS. The gain or loss for any given transaction is a function of the sales proceeds, the purchase price and allowable transaction costs. Please refer to IRS Publication 550 (on line at IRS.gov) for further guidance. Information relating to each of these items, on an individual transaction basis, is available from the both the monthly and annual confirmation statements located in the Statements and Downloads section of your Account Management Menu. We have formatted the monthly confirmation statements in MS Money and Quicken, or you can use an Excel Spreadsheet to help with your calculations. If you have trouble with downloading your statements, please contact the Technical Assistance Center at 1-877-442-2757, and press 4.

Interactive Brokers cannot provide any assistance in determining transaction gains or losses due to the numerous and often taxpayer specific considerations involved. Please consult with your tax advisor for guidance in this area.

What is the Realized Profit and Loss on the 1099-B for commodities transactions?
It is the actual aggregate profit or loss recognized over the course of the year from transactions in commodity futures and regulated futures contracts which have been closed, reached final settlement or, in the case of options, expired.

Does the gross proceeds balance in the 1099-B for my securities account include commissions?
The gross proceeds balance is net of commissions.

Does the gross proceeds balance in the 1099-B for my securities account include equity and index option transactions?
No. The proceeds (premium) received from the sale of put and call options are not required to be reported. However, proceeds associated with option exercises and assignments will be reflected in gross proceeds on the 1099-B. Please consult your tax professional for more information.

Does the gross proceeds balance in the 1099-B for my securities account include short sales?
Yes. Proceeds relating to the securities short sales are included regardless of whether the securities have been subsequently purchased.

Does the gross proceeds balance in the 1099-B include sale transactions which have taken place in December, but which will not settle until January?
Yes. As proceeds are reported on a trade date basis a sale is reportable in the year it is executed not settled. In the case of bond sales which take place in December but which do not settle until the following year, the sale proceeds will be reported in the year of the trade, and accrued interest, if any, will be reported included in the following year’s 1099-INT, when the funds are received in your account.

What happens if I receive Form 1099-DIV, 1099 INT, 1099 OID or 1099 B that includes income that needs to be reported by other taxpayers?
If you receive a Form 1099 that includes income attributable to other taxpayers under other Taxpayer Identification Numbers, you will need to follow the IRS instructions for "Nominees." Please refer to the 2007 Instructions for Form 1040, U.S. Individual Income Tax Return, Schedule B, Interest and Ordinary Dividends or to IRS publication 550 , Investment Income and Expenses, for more information. IRS forms, instructions and publications can be obtained free of charge on line at www.IRS.gov or by calling the IRS at 800.829.3676 (800/TAX FORM).

What IRS form(s) do I use to report Form 1099-DIV tax information?
Generally, individual investors will need to report Form 1099-DIV information on IRS Form 1040, "U.S. Individual Income Tax Return". Depending on the type of information reported on your Form 1099-DIV, you may need to include with Form 1040 additional forms such as Schedule B, "Interest and Ordinary Dividends" and/or Schedule D, "Capital Gains and Losses" , Form 1116, "Foreign Tax Credit". All IRS forms are available free of charge on line at www.IRS.gov/formspubs or by calling the IRS at 800.829.3676 (800/TAX FORM).

Does Interactive Brokers send the IRS a copy of my 1099s?
Yes, IB sends an electronic file to the IRS with same information that was provided to you by IB on Form 1099.

Where can I find more descriptive information regarding your 1099’s?
You may find more information on our website by clicking here on Tax Instructions. In addition, each tax form contains instructions provided by the IRS.

If I completed a W-8 form and I am not a legal resident of the United States will I receive a 1099?
If you are not a U.S. citizen or legal resident, , you will not receive a 1099 form. However, you may receive Form 1042 S. Form 1042 S reports interest payments, dividends, and payment in lieu income as well as any applicable U.S. Tax withholding, thereon, from US Securities paid to foreign investors.

I've received a tax form that is incorrect. How can I get it corrected?
Inquiries regarding the accuracy of any U.S. (Form 1099, 1042 or 5498) or Canadian (Form T3, T5, T5008 or RL-3) tax form or a taxpayer identification number should be submitted via the IB Tax Correction Form available through login to Account Management and by selecting Inquiry/Problem Ticket and then Tax Correction Form. This form allows you to identify the tax forms and line items in question and provide descriptive detail as to the necessary corrections.

Why did I receive a Form 1099 for the amount that I received from a deceased/divorced person's account?
The IRS requires us to report all assets received by an individual from an account due to death or divorce. Please consult your tax advisor concerning these amounts.

Why did I receive a Form 1099-R for a distribution from my employer's retirement plan that was rolled directly into an IRA?
This is called a direct rollover. Your employer is required to report assets leaving the employer’s plan on Form 1099R. Box 7 indicated the type of distribution occurred. Common distribution codes are:

1 Early Distribution, no known exception
2 Early Distribution, exception applies
3 Disability
4 Death
7 Normal Distribution
G Direct rollover
Q Qualified distribution from a Roth IRA
T Roth IRA distribution, exception applies

The successor trustee (receiver of assets in a rollover) is required to report the contribution (receipt) of the same assets to the IRS on Form 5498.

Why did I receive a Form 1099-R for my rollover from one IRA to another IRA?
A rollover occurs when money is distributed from one tax-deferred account and deposited within 60 days to another tax deferred account. There are two types of IRA rollovers: 1) a direct rollover, which occurs when fund are transferred directly from one account to another account by the account custodians/trustees. 2) A distribution is made directly to you and within 60 days you deposit the full amount (including any taxes withheld) into a new IRA or other tax deferred account. The custodian/trustee distributing the funds will issue you a 1099R reporting the payment/transfer of funds. The code in Box 7 (listed above) indicates what type of payment was made. The custodian/ trustee receiving the IRA funds will issue a Form 5498 in May reporting the contribution to the receiving IRA account which reports to the IRS that you deposited the money into another IRA.

Why has "Taxable amount not determined" been checked in Form 1099-R, Box 2b despite a balance being reported in Box 2a as a "Taxable amount"?
The IRS requires that we report the full amount of your IRA distribution in Box 1 (Gross distribution) In Box 2a (Taxable amount), we also report the full amount distributed unless you have directly rolled (transferred account to account) your funds to another IRA custodian/trustee. If funds are distributed directly to you we can not determine the taxable amount, since we do not know whether you have made any non-deductible (after-tax) contributions to this IRA account. Box 2b is checked to indicate that we have not determined the taxable amount Please consult your tax advisor to determine if you have made non-deductible (after-tax) contribution to your IRA account, which may lower your taxable amount.

Why have taxes been withheld from my IRA distribution, I deposited the funds within 60 days into a new IRA/retirement account?
If you are under age 59 ½, the IRS requires to withhold taxes from IRA distributions, unless your IRA rollover is sent directly account to account. Box 4 of the 1099R reports any withheld taxes. Please note that for any tax deferred account rollover on which taxes have been withheld, the full amount (including the taxes) must be re-deposited into a tax-deferred account within 60 days for the transaction to be income tax free.

What is Form 2439?
Form 2439, Notice to Shareholder of Undistributed Long –Term Capital Gains reports to owners of Regulated Investment Companies (RIC) and Real Estate Investment Trusts (REIT) undistributed capital gains allocable to them. A separate form 2439 will be issued for each investment. These forms will be issued 90 days following the fiscal year end of the RIC or REIT. Note that some RIC and REIT do not have calendar fiscal years, it is best to consult the website of the investment or your tax advisor for specific guidance in this area.

Box 1a reports total undistributed long-term capital gains attributable to your ownership of the fund, for individuals this amount is reported on your IRS Form 1040, US Individual Income Tax Return, Schedule D, Capital Gains and Losses. Box 1b is your allocable portion of the amount included in Box 1a that has been designation as unrecaptured section 1250 gain from the disposition of depreciable real property. For individuals, this amount is entered on your IRS From 1040, US Individual Income Tax Return, Schedule D, Capital Gains and Losses, worksheet. Box 2 contains any Federal Income tax paid by the RIC or REIT on this gain in your behalf.

What is Form 5498?
Form 5498,"IRA, and Coverdell ESA Contribution Information", is an information form used to report contributions and rollovers to Traditional IRAs, Roth IRAs, SEP IRAs, and SIMPLE IRAs for which Principal Trust Company is custodian. As contributions to these types of tax deferred accounts for the prior year may be made up to the tax filing deadline of April 15, the IRS has established May 31 as the deadline for providing Form 5498.

I already filed my taxes and did not include information reported on Form 1099. What do I do now?
You will have to file an amended tax return that includes the applicable information as reported on Form 1099. As the IRS verifies the information on your tax returns with the 1099’s received from banks, brokers and other sources, you may receive a notice from the IRS indicating that your return was filed without the omitted information . Consult your tax or legal advisor for further information.

I already filed my taxes and have received a Corrected Form 1099. What do I do now?
You will have to file an amended tax return to report the information as reported on the corrected Form 1099. As the IRS verifies the information on your tax returns with the 1099’s received from banks, brokers and other sources, you may receive a notice from the IRS indicating that your return was filed using incorrect information . Consult your tax or legal advisor for further information.

How do I contact the Internal Revenue Service (IRS)?
To request federal tax forms, call 800.829.3676 (800/TAX-FORM), or visit: http://www.irs.gov/formspubs. To ask specific questions concerning US individual tax returns call 800.829.1040. For US business return questions, call 800.829.4933.

• What is interest income?
• Is U.S. Government Interest Taxable?
• Why is U.S. Government interest reported separately on my 1099 INT?
• What is Original Issue Discount (OID)?
  

What is interest income?
Interest is income earned on cash balances, bonds, notes and some preferred securities. Some distributions called dividends are actually interest and should be reported as such. Earnings on money market funds are dividends, not interest.

Is U.S. Government Interest Taxable?
Interest from U.S. Obligation such as interest on US Treasury bills, notes, and bonds issued by any agency or instrumentality of the United States is subject to federal income tax. Interest from U.S. Obligations is not subject to state or local income tax.

Interest on U.S. Treasury Bills is the difference between the discounted price you paid for the purchase of the bill and the value you received at sale or maturity. This amount should be reported as interest on your federal income tax return. Generally, all other U.S. Government obligations pay interest semi annually.

Why is U.S. Government interest reported separately on my 1099 INT?
US Government interest is reported separately for state reporting purposes.

What is Original Issue Discount (OID)?
OID is the excess of an obligation’s stated redemption price at maturity over its issue price. OID is amortized over the life of the security, recognizing a portion of the discount annually as taxable interest.

• What are ordinary dividends?
• What are Qualified Dividends?
• How are short-term capital gains distributions from a mutual or exchange traded fund (ETF) reported?
• Where are Unrealized capital gains distributions from Regulated Investment Companies (RIC) and Real Estate Investment Trusts (REIT) reported?
• Where are my dividends/payments in lieu reported?
• What is a Return of Capital?
• How do I know if my account had a Return of Capital (ROC)?
• Why were foreign taxes withheld from my dividends?
• Should I take the foreign tax paid as a foreign tax credit or as a deduction on my tax return?
  

What are ordinary dividends?
Dividends are paid by corporations, mutual funds, money market funds, and other entities such as REIT’s. Ordinary dividends include payments from foreign securities such as ADR’s and foreign companies and net short term gains from mutual funds. Dividends that have been reinvested are also included in this amount.

What are Qualified Dividends?
Qualified Dividends are distributions which meet the criteria to be subject to a beneficial federal tax rate. In general, qualified dividends are distributions received from U.S. Domestic corporations or qualified foreign corporations where you have owned the investment for more than 61 days before or after the ex dividend date. IRS publication 550 “Investment Income and Expenses” available free on line at www.IRS.gov and/or your tax professional can assist in determining if your dividends are eligible for the beneficial rate.

How are short-term capital gains distributions from a mutual or exchange traded fund (ETF) reported?
Long–term capital gain distributions from mutual and exchange traded funds are reported on your Form 1099 DIV in box 2a.

Where are Unrealized capital gains distributions from Regulated Investment Companies (RIC) and Real Estate Investment Trusts (REIT) reported?
These gains are reported on Form 2439 in box 1a. There may be tax paid on your behalf by the RIC or REIT, this tax is reported to you on Form 2439 in box 2.

Where are my dividends/payments in lieu reported?
Substitute payments, such as dividends on securities that you have loaned to others are reported in box 8 on Form 1099 Misc.

What is a Return of Capital?
A distribution paid to fund shareholders in excess of a fund's current and accumulated earnings and profits is a return of capital (ROC) distribution. A ROC distribution is generally nontaxable and reduces a shareholder's cost basis in the investment If a ROC distribution exceeds a shareholder's cost basis, then any additional amount is treated as a capital gain.

For example: A shareholder buys 1 share of Fund A for $10. In 2003, Fund A pays a $1 per share ROC distribution. The shareholder's cost basis in Fund A after the ROC distribution is $9 per share ($10 initial investment less $1 ROC distribution).

How do I know if my account had a Return of Capital (ROC)?
IB will report ROC distributions to shareholders as nontaxable distributions in Form 1099-DIV, Dividends and Distributions. Please note that this information is often not available until after the initial 1099forms are made available to you. Once the information is available IB will issue corrected 1099s to you. We suggest that you check your tax forms in Account Management – Tax Forms prior to filing your return to verify that you have used up to date information.

Why were foreign taxes withheld from my dividends?
Foreign taxes are withheld on foreign stocks even though the shares are trades and were purchased on a U.S. stock exchange. They are withheld at the source (company) level and remitted to the foreign government, much like U.S. withholding taxes. U.S. taxpayers may receive a tax credit for these foreign taxes on their U.S. Tax returns. IRS Publication 514 “ Foreign Tax Credit for Individuals” can provide more information on this topic. We also suggest that you consult your tax professional for further information on this subject.

Should I take the foreign tax paid as a foreign tax credit or as a deduction on my tax return?
Treatment of foreign tax withheld as a foreign tax credit or as a deduction depends upon the tax situation of each shareholder. IRS Publication 514, “Foreign Tax Credit for Individuals” and the instructions for Schedule A “Itemized deductions” and Form 1116 “Foreign Tax Credit” provide more specific guidance. We also recommend that you consult IRS Publication 514, “Foreign Tax Credit for Individuals”, for additional information on this subject. Please consult your tax professional for any additional information and determination of the appropriate treatment for your tax situation.

• What is a capital gain or loss?
• What are short-term capital gains?
• What are long-term capital gains?
• What is a wash sale?
• What are the tax consequences of a wash sale?
• When will I receive My K-1 from a Publicly Traded Partnership (PTP), Royalty Trust?

What is a capital gain or loss?
Assets held for investment purposes such as stocks, options and bonds are classified by the IRS as capital assets. When such assets are sold a capital gain or loss is realized on the sale. If the capital asset is sold for a price greater than its purchase price, then a capital gain has been realized; if less, then a capital loss has been realized. In determining whether a capital gain or loss has been realized, adjustments to the purchase and sales price may be allowed to recognize certain transaction costs such as commissions and other specific adjustments.

Proper determination and recognition of capital gain and loss is important as capital gains may be subject to tax rates lower than that for other forms of income. Net capital losses are subject to annual limits. The taxation of capital gains and losses are also distinguished by the length of time the asset was held prior to sale.

IRS Publication 550 "Investment Income and Expenses" is a good source of information on this topic. It is available free on line at www.IRS.gov/formspubs. We also recommend you consult your tax professional.

What are short-term capital gains?
Short-term capital gains are capital gains earned on the sale of securities held for less than 1 year. The date a security is acquired is the trade date +1 and the date of sale is the trade date.

What are long-term capital gains?
Long-term capital gains are capital gains earned on the sale of securities held for more than 1 year. The date a security is acquired is the trade date +1 and the date of sale is the trade date. Net long-term capital gains are eligible to be taxed at favorable tax rates.

What is a wash sale?
A wash sale occurs when you sell stock or securities and, within 30 days before or after the sale, you buy acquire in a taxable exchange or acquire a contract or option to buy substantially identical stock. Commodity futures contracts are not stock or securities and are not covered by the wash sale rule, however any position of a straddle acquired after June 23, 1981 is included in these rules. See IRS Publication 550, ‘Investment Income and Expenses’, available free on line at www.IRS.gov/formspubs or consult your tax professional.

For purposes of the wash sale rule, a short sale is considered complete on the date the shore sale is entered into if on that date:

1. You own (or, on or before the date of the short sale, you entered into a contract or option to acquire) securities identical to those sold short (in any account you may own regardless of where it is located) and
2. You deliver such stock or securities to close the short sale.

What are the tax consequences of a wash sale?
Losses from wash sales are not deductible when they occur. Any unallowed loss should be added to the cost basis of the newly acquired security. The unallowed loss will be reflected in the calculation of gain or loss when these shares are sold. If you think you may have entered into a wash sale, please consult your tax professional for more information.

When will I receive My K-1 from a Publicly Traded Partnership (PTP), Royalty Trust?
K-1s are prepared and distributed by the individual partnership or trust. IB does not have access to these documents. Most PTPs and Royalty Trusts have investor contact phone lines though which you can obtain this information, additionally many have investor websites from which you can download your information.

• Why does IB withhold U. S. taxes from my dividends and substitute payments?
• Where is the tax sent?
• What is Form 1042-S?
• When will I receive my 1042 –S forms?
• Can I receive a refund of tax withheld?
  

For general information on this topic please refer to IRS Publication 519 "U.S. Tax Guide for Aliens" available on line at www.IRS.gov/formspubs.

Why does IB withhold U. S. taxes from my dividends and substitute payments?
US Tax law requires that U.S. Tax be withheld from dividends paid by US Corporations to foreign persons at 30%. The withholding is less if the U.S. has entered into a tax treaty with your country. In most cases the treaty withholding rate on dividends is 15%, however this amount does differ. This law applies to all ordinary dividends, payments in lieu, and short-term capital gain distributions paid to foreign persons.

Investment interest income is not subject to US withholding.

Where is the tax sent?
Interactive Brokers remits the tax withheld to the U.S. Treasury.

What is Form 1042-S?
Form 1042-S, "Foreign Person's U.S. Source Income Subject to Withholding", is the federal information form which reports the amount of interest, dividends, payments in lieu paid to and for account managers, fees earned to the Internal Revenue Service (IRS), annually. IB may issue you one or more 1042 S forms. Each type of income is reported on a separate form using a code in Box 1. Common codes are:

01) Interest paid by U.S. obligors including the U.S. Treasury
29) Deposit Interest
30) Original issue discount (OID)
06) Dividends paid by U.S. Corporations
34) Substitute payment – Dividends
35) Substitute- payment – Other
50) Other Income

Box 2 indicates the amount of income credited to your account of this type, Box 5 the rate at which tax was withheld and Box 7, the amount of U.S. Tax withheld.

If the income is exempt from withholding tax a code appears in Box 6.

When will I receive my 1042 –S forms?
The form will be made available to you by March 15th and is located in Account Management/Report Management/Tax Forms.

Can I receive a refund of tax withheld?
In general, amounts withheld for U.S. taxes are non-refundable. However, under certain circumstances, such as an incorrect rate being applied to withhold tax, a refund can be obtained. If you are an individual and file either Form 1040NR, "U.S. Nonresident Alien Income Tax Return" or 1040NR-EZ "U.S. Income Tax Return for Certain Nonresident Aliens with No Dependents to obtain a refund. There are similar U. S. forms for trusts and corporations. IRS Publication 515 "Withholding of Tax on Non –Resident Aliens and Foreign Entities" and IRS Publication 519 "U.S. Tax Guide for Aliens" available free at www.IRS.gov/formspubs provides more information on this subject.

In addition to the US Forms1042S discussed above, Residents of Canada will also receive a Form T3, T5 and T5008 by the last day in February for Canadian tax filings. Additionally residents of Québec will receive RL3 on this date. These forms are available in Account Management/Report Management/Tax Forms.

Form T3 Titled "State of Trust Income Allocations and Designations" The form details trust income allocation. Various form of Canadian source income is report in identified boxes on this form.

Form T5 - Titled "Statement of Investment Income". This form details interest and dividends. Interest from Canadian sources is in Box 13, Foreign Dividends in Box 15, and Foreign Taxes Withheld in Box 16.

Form T5008 - Titled "Statement of Securities Transactions". A separate T5008 will be provided for stocks, options, and futures. SHS (stocks), OPN (options), FUT (futures) will be specified in Box 15, the number of shares or contracts for the year in Box 16, and the gross proceeds less commissions in Box 21.

Form RL3 – For Québec residents only - Reports the information on From T5 to Provincial tax authorities and is for use on residents Provincial tax returns.

• Can I open an account with Interactive Brokers UK Limited and trade all of the products your US company or website supports?
• Do I need to complete a W8 Form as a client of IBUK considering I am a non US resident?
• In the W8 form can I choose to pay my capital gain taxes in the UK or anywhere else outside of the US?
• After I complete my W8 form can I have a copy of the signed copy?
• As a resident of the UK, for my tax purposes solely, can I elect to open an account with IB US directly and bypass opening an account through IBUK?
  

Can I open an account with Interactive Brokers UK Limited and trade all of the products your US company or website supports?
Yes. Moreover, there are no cost differences.

Do I need to complete a W8 Form as a client of IBUK considering I am a non US resident?
Yes, because the entity holding your client money is Interactive Brokers LLC, in the US.

In the W8 form can I choose to pay my capital gain taxes in the UK or anywhere else outside of the US
When you complete your W8 form you can denote that you are a UK resident and that there is a treaty between the UK and US which allows you to choose to pay your taxes in the UK by entering this information W8 form (terms and conditions apply, e.g., IB still will collect taxes on dividends and stamp duty will be collected for all London Stock Exchange share purchases in real-time).

After I complete my W8 form can I have a copy of the signed copy?
As you complete the W8 form you can print a copy for your records.

As a resident of the UK, for my tax purposes solely, can I elect to open an account with IB US directly and bypass opening an account through IBUK?
If you are a UK resident you can only open an account with IBUK. Although, your client money will always be held by Interactive Brokers LLC, in the US.