Tax Questions about Futures

[sweeney0014]

1) Where does one record record futures and futures options trades on a tax form assuming the MTM accounting method has not been elected? Is it section 1256? (Also, assuming all trades were opened and closed in the same calendar year and no trades were open at yr end.)

2) How is the gain/loss recorded? (Same assumption as #1) Is the actual realized gain/loss (similar to stocks & stock options on Sched D) recorded, or is the MTM gain/loss recorded? Why?

Thanks in advance for any responses.

Cheers

 

[heech]

Section 1256 specifically uses MTM with year-end values. There's no "election" involved. It's just a totally different tax treatment from equities.

As far as how you actually file your returns, you'll have to ask a professional. But I believe it's this:
http://www.irs.gov/pub/irs-pdf/f6781.pdf

 

[el pollo]

The actual contracts are referred to as "Section 1256 contracts", File the value from your broker 1099 on IRS 6781, that calculates the hybrid LT/ST capital gains treatment. Then plug those numbers on to the schedule D. It is really that simple.

 

[morgen]

As for your case, Use Form 6781 to report gains and losses from section 1256 contracts and straddles before entering these amounts on Schedule D. Include a copy of Form 6781 with your income tax return.

 

[Adrian Monk]

Quote from sweeney0014:

1) Where does one record record futures and futures options trades on a tax form assuming the MTM accounting method has not been elected? Is it section 1256? (Also, assuming all trades were opened and closed in the same calendar year and no trades were open at yr end.)

2) How is the gain/loss recorded? (Same assumption as #1) Is the actual realized gain/loss (similar to stocks & stock options on Sched D) recorded, or is the MTM gain/loss recorded? Why?

Thanks in advance for any responses.

Cheers

Yes , it is section 1256,

According to IRS Publication 550, a "Section 1256 Contract" is a regulated futures contract, foreign currency contract, or a non-equity option. All of these are marked to the market value at the end of the tax year. This is not the same as making the mark to market election (475f). These trading instruments are reported on Form 6781 (Gains and Losses from Section 1256 Contracts and Straddles) and not schedule D with stock sales. They are considered 60% long term capital gain or loss and 40% short term capital gain or loss for tax purposes.