Fillable Form 6781 - Gains And Losses From Section 1256 Contracts And Straddles

Form 6781 (2015)

Page

Future Developments

on the last business day of the tax year.

If you make this election, any positions

The wash sale rules don't apply.

you held on the day before the election

For the latest information about

are deemed sold for their fair market

If your section 1256 contracts produce

developments related to Form 6781 and

value at the close of the last business

capital gain or loss, gains or losses on

its instructions, such as legislation

day before the day of the election. For

section 1256 contracts open at the end

enacted after they were published, go to

elections made on or before August 18,

of the year, or terminated during the

2014, take this gain or loss into account

year, are treated as 60% long term and

when computing taxable income for the

General Instructions

40% short term, regardless of how long

year in which the election was made. For

the contracts were held.

elections made after August 18, 2014,

Section references are to the Internal

The mark-to-market rules do not apply

take this gain or loss into account in the

Revenue Code unless otherwise noted.

if you properly and timely identified a

year you would have reported the gain or

section 1256 contract as a hedge.

loss if the identified mixed straddle had

Purpose of Form

not been established. In addition, when

Straddle

Use Form 6781 to report:

the gain or loss that accrued prior to the

time the identified mixed straddle was

A straddle means offsetting positions

• Any capital gain or loss on section

established is taken into account, it will

with respect to personal property of a

1256 contracts under the mark-to-

have the same character it would have

type that is actively traded.

market rules, and

had if the identified mixed straddle had

• Gains and losses under section 1092

Offsetting Positions

not been established. See Regulations

from straddle positions.

section 1.1092(b)-6 for details.

If there is a substantial decrease in risk

For details on section 1256 contracts

Each year you hold positions subject

of loss to a taxpayer holding a position

and straddles, see Pub. 550, Investment

to this election, you must mark to market

because that taxpayer or a related party

Income and Expenses.

your section 1256 contracts and

also holds one or more other positions,

determine, in accordance with

then those positions are offsetting and

Section 1256 Contract

Regulations sections 1.1092(b)-3T and

may be part of a straddle. However, if an

1.1092(b)-6, whether you have a net gain

A section 1256 contract is any:

identified straddle is properly

or loss. If the net gain or loss is

established, other positions held by the

• Regulated futures contract,

attributable to a net non-section 1256

taxpayer won't be treated as offsetting

• Foreign currency contract,

position, then the net gain or loss is

with respect to any position that is part

treated as a short-term capital gain or

of the identified straddle.

• Nonequity option,

loss. Enter it directly on Form 8949 and

Box A. Mixed Straddle

• Dealer equity option, or

identify the election. If the net gain or

Election

loss is attributable to a section 1256

• Dealer securities futures contract.

position, enter the gain or loss in Part I of

For definitions of these terms and

Under section 1256(d), you can elect to

Form 6781 and identify the election.

more details, see section 1256(g) and

have the mark-to-market rules not apply

Pub. 550.

Box C. Mixed Straddle

to section 1256 contracts that are part

of a mixed straddle. A mixed straddle is

Account Election

A section 1256 contract doesn't

any straddle in which at least one but

include any interest rate swap, currency

Make this election according to

not all of the positions is a section 1256

swap, basis swap, commodity swap,

Temporary Regulations section

contract. On the day the first section

equity swap, equity index swap, credit

1.1092(b)-4T(f) to establish one or more

1256 contract forming part of the

default swap, interest rate cap, interest

mixed straddle accounts for 2016 by the

straddle is acquired, each position

rate floor, or similar agreement.

due date (without extensions) of your

forming part of the straddle must be

Special rules apply to certain foreign

2015 tax return. To make this election,

clearly identified as being part of such

currency contracts. See section 988 and

check box C and attach to your return

straddle. If you make this election, it will

Regulations sections 1.988-1(a)(7) and

(or your request for an extension of time

apply for all later years and you can't

1.988-3. If an election is made under

to file) the statement required by the

revoke it without IRS consent. If you are

section 988(a)(1)(B) or 988(c)(1)(D), attach

regulations. Report the annual account

making or have previously made this

to your return a list of the contracts

net gain or loss from a mixed straddle

election, check box A and report the

covered by the election(s). On the

account in Part II and identify the

section 1256 component in Part II

attachment, show the net gain or loss

election. See Temporary Regulations

instead of Part I.

reported from those contracts and

section 1.1092(b)-4T(c)(4) for limits on

identify where the gain or loss is

Box B. Straddle-By-Straddle

the total annual account net gain or loss.

reported on the return. If an election is

Identification Election

If you didn't make any of the above

made under section 988(a)(1)(B), report

elections and you have a loss on the

on Form 6781 the gains and losses from

Make this election for mixed straddles

section 1256 component, use Part II to

section 1256 contracts that are also

according to Temporary Regulations

reduce the loss by any unrecognized

section 988 transactions.

section 1.1092(b)-3T(d) by clearly

gain on the non-section 1256

identifying each position by the earlier of

Options and commodities dealers

component before making an entry in

(a) the close of the day the identified

must take any gain or loss from the

Part I. You also must reduce the loss

mixed straddle is established or (b) the

trading of section 1256 contracts into

from any section 1256 component of a

time the position is disposed of. No

account in figuring net earnings subject

straddle that would be a mixed straddle

straddle-by-straddle identification

to self-employment tax. See section

if the positions had been properly

election may be made for any straddle

1402(i).

identified as such.

for which a mixed straddle election was

Mark-to-Market Rules

made or if one or more positions are

Box D. Net Section 1256

includible in a mixed straddle account. If

Contracts Loss Election

Under these rules, each section 1256

you are making or have previously made

contract held at year end is treated as if

this election, check box B.

If you have a net section 1256 contracts

it were sold at fair market value (FMV)

loss for 2015, you can elect to carry it

Form 6781 - Gains And Losses From Section 1256 Contracts And Straddles - 2015 Page 2

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