Spot FOREX traders and investors may elect to opt out of I.R.C. Section 988 and into I.R.C. Section 1256 so long as the election is properly documented on a proactive basis. You are not able to make a universal election at the end of the year.

Opting out of I.R.C. Section 988 may be a smart choice when in a profit position. However, if a loss is generated with this election, you will still be bound by the $3,000 a year capital loss deduction limitation.