Foreign Futures: 1256 Contracts?

A

AllenCook

I have done some research but have still not found a definitive answer to whether or not foreign futures (e.g, DAX, HSI, etc.) will be treated as 1256 contracts or not. Beginning with 2003 I now primarily trade only futures but in addition to ES, YM, CME currency futures and ZN, I now also trade TOPX (Japan), HSI (Hong Kong), DAX and GBL (Eurex).

Based on my reading of the section it requires a "regulated futures contract" but one of the conditions states it must be "domestic board of trade" or registered with the SEC. I am taking the conservative view that it means these futures do NOT qualify. I believe I have seen some comment that they believe this also but I have not seen any definitive answer.

Anyone have any first-hand experience?
 
The foreign stock index futures you listed are regularly treated as 1256 contracts because they have CFTC Rule 30.10 approval to be offered to U.S. citizens. CFTC Rule 30.10 relief is, in practice, the same as getting approval by the Secretary of the Treasury. Approval by the Secretary of the Treasury is another way to get 1256 contract designation in IRS pub. 550.

If you choose not to treat your foreign futures as Section 1256 contracts, than you are needlessly denying yourself the advantageous 60/40 long term/short term capital gains tax.

Here is Green's analysis of your question:

http://www.greencompany.com/EducationCenter/foreignlistedfutures.pdf
 
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