I have about $20k in stock losses to carry over into 2010, and plan to only trade currency futures this year. I have begun reading on the tax handling of these types of trades and believe in this situation, my best option is to opt out of IRC 1256 for IRC 988, since (I believe) any gains would offset short term losses, and if I do incur a loss on currency futures for 2010, I could write that off as ordinary income.

However, if I did opt for IRC 1256, and suppose I gain $20k in currency futures this year, would that result in a net $0 investment taxes for 2010 (if carryover losses and 2010 gains cancel out), or do these gains not cancel out my prior carryover losses? If that is the case, would I have to pay taxes on the $20k gains at 60/40 long term/short term then deduct the maximum $3k in stock losses short term such that I would carry $17k over into 2011?

I failed to mention that my carryover losses are all short-term and I am not a business trader and do not have trader tax status.

Sorry, but the opt-out process that you cite is beyond my level of expertise.