6781 Gains and Losses From Section 1256 Contracts and Straddl

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Form

6781

Gains and Losses From Section 1256
Contracts and Straddles
▶ Go

Department of the Treasury
Internal Revenue Service

OMB No. 1545-0644

2018

to www.irs.gov/Form6781 for the latest information.
▶ Attach to your tax return.

Attachment
Sequence No.

82

Identifying number

Name(s) shown on tax return

A
B

C
D

DRAFT AS OF
November 5, 2018
DO NOT FILE

Check all applicable boxes (see instructions).

Part I

Mixed straddle election
Straddle-by-straddle identification election

Mixed straddle account election
Net section 1256 contracts loss election

Section 1256 Contracts Marked to Market
(a) Identification of account

(b) (Loss)

(c) Gain

1

(

Add the amounts on line 1 in columns (b) and (c) . .
Net gain or (loss). Combine line 2, columns (b) and (c)

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5

Form 1099-B adjustments. See instructions and attach statement .
Combine lines 3 and 4 . . . . . . . . . . . . .

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4
5

Note: If line 5 shows a net gain, skip line 6 and enter the gain on line 7. Partnerships and S corporations, see
instructions.

If you have a net section 1256 contracts loss and checked box D above, enter the amount of loss to be
carried back. Enter the loss as a positive number. If you didn't check box D, enter -0- . . . . . . . .

6

7

Combine lines 5 and 6

7

8

Short-term capital gain or (loss). Multiply line 7 by 40% (0.40). Enter here and include on line 4 of Schedule
D or on Form 8949 (see instructions) . . . . . . . . . . . . . . . . . . . . . .

8

9

Long-term capital gain or (loss). Multiply line 7 by 60% (0.60). Enter here and include on line 11 of Schedule
D or on Form 8949 (see instructions) . . . . . . . . . . . . . . . . . . . . . .

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Part II
Gains and Losses From Straddles. Attach a separate statement listing each straddle and its components.
Section A—Losses From Straddles

(a) Description of property

(b) Date
entered
into or
acquired

(c) Date
closed out
or sold

(d) Gross
sales price

(e) Cost or
other basis
plus
expense of
sale

(f) Loss.
If column (e)
is more than
(d), enter
difference.
Otherwise,
enter -0-

(g)
Unrecognized
gain on
offsetting
positions

(h) Recognized loss.
If column (f) is more
than (g), enter
difference.
Otherwise, enter -0-

10
11a

Enter the short-term portion of losses from line 10, column (h), here and include on line 4 of Schedule D or on
Form 8949 (see instructions)
. . . . . . . . . . . . . . . . . . . . . . . .

11a (

)

b

Enter the long-term portion of losses from line 10, column (h), here and include on line 11 of Schedule D or on
Form 8949 (see instructions)
. . . . . . . . . . . . . . . . . . . . . . . .

11b (

)

Section B—Gains From Straddles
(a) Description of property

(b) Date
entered
into or
acquired

(c) Date
closed out
or sold

(f) Gain. If column
(d) is more than (e),
enter difference.
Otherwise, enter -0-

(e) Cost or other
basis plus
expense of sale

(d) Gross
sales price

12
13a

Enter the short-term portion of gains from line 12, column (f), here and include on line 4 of Schedule D or on
Form 8949 (see instructions)
. . . . . . . . . . . . . . . . . . . . . . . .

13a

b

Enter the long-term portion of gains from line 12, column (f), here and include on line 11 of Schedule D or on
Form 8949 (see instructions)
. . . . . . . . . . . . . . . . . . . . . . . .

13b

Part III

Unrecognized Gains From Positions Held on Last Day of Tax Year. Memo Entry Only (see instructions)
(a) Description of property

(b) Date
acquired

(c) Fair market value on last
business day of tax year

(d) Cost or other basis
as adjusted

(e) Unrecognized gain.
If column (c) is more
than (d), enter difference.
Otherwise, enter -0-

14

For Paperwork Reduction Act Notice, see instructions.

Cat. No. 13715G

Form 6781 (2018)

Form 6781 (2018)

Section references are to the Internal
Revenue Code unless otherwise noted.

Future Developments
For the latest information about
developments related to Form 6781 and its
instructions, such as legislation enacted
after they were published, go to
www.irs.gov/Form6781.

Page

reported from those contracts and identify
where the gain or loss is reported on the
return. If an election is made under section
988(a)(1)(B), report on Form 6781 the gains
and losses from section 1256 contracts
that are also section 988 transactions.
Options and commodities dealers must
take any gain or loss from the trading of
section 1256 contracts into account in
figuring net earnings subject to
self-employment tax. See section 1402(i).

2

will apply for all later years and you can’t
revoke it without IRS consent. If you are
making or have previously made this
election, check box A and report the
section 1256 component in Part II instead
of Part I.

DRAFT AS OF
November 5, 2018
DO NOT FILE

What’s New

Special rules for capital gains invested
in Qualified Opportunity Funds. In 2018, if
you have a capital gain, you can invest that
gain into a Qualified Opportunity Fund. You
may elect to defer part or all of the gain
that you would otherwise include in income
until December 31, 2026. You may also be
able to permanently exclude gain from the
sale or exchange of an investment in a
Qualified Opportunity Fund if the
investment is held for at least 10 years. For
information about how to elect to use these
special rules, see the Instructions for Form
8949. There are some limitations on the
capital gains eligible for the special rules.
For example, these special rules generally
only allow you to defer capital gain net
income from section 1256 contracts. For
more information on the special rules see
Proposed Regulation section
1.1400Z-2(a)-1.

General Instructions
Purpose of Form

Mark-to-Market Rules

Under these rules, each section 1256
contract held at year end is treated as if it
were sold at fair market value (FMV) on the
last business day of the tax year. The wash
sale rules don’t apply.
If your section 1256 contracts produce
capital gain or loss, gains or losses on
section 1256 contracts open at the end of
the year, or terminated during the year, are
treated as 60% long term and 40% short
term, regardless of how long the contracts
were held.
The mark-to-market rules don’t apply if
you properly and timely identified a section
1256 contract as a hedge.

Straddle
A straddle means offsetting positions with
respect to personal property of a type that
is actively traded.

Offsetting Positions

Use Form 6781 to report:
• Any capital gain or loss on section 1256
contracts under the mark-to-market rules,
and
• Gains and losses under section 1092
from straddle positions.
For details on section 1256 contracts
and straddles, see Pub. 550, Investment
Income and Expenses.

If there is a substantial decrease in risk of
loss to a taxpayer holding a position
because that taxpayer or a related party
also holds one or more other positions,
then those positions are offsetting and
may be part of a straddle. However, if an
identified straddle is properly established,
other positions held by the taxpayer won’t
be treated as offsetting with respect to any
position that is part of the identified
straddle.

Section 1256 Contract

General Rule for Straddles

A section 1256 contract is any:
• Regulated futures contract,
• Foreign currency contract,
• Nonequity option,
• Dealer equity option, or
• Dealer securities futures contract.
For definitions of these terms and more
details, see section 1256(g) and Pub. 550.
A section 1256 contract doesn’t include
any securities future contract, option on a
securities future contract, interest rate
swap, currency swap, basis swap,
commodity swap, equity swap, equity index
swap, credit default swap, interest rate cap,
interest rate floor, or similar agreement.
Special rules apply to certain foreign
currency contracts. See section 988 and
Regulations sections 1.988-1(a)(7) and
1.988-3. If an election is made under
section 988(a)(1)(B) or 988(c)(1)(D), attach
to your return a list of the contracts
covered by the election(s). On the
attachment, show the net gain or loss

If you don’t make any of the elections
described in Boxes A, B, or C, and you
have a loss on the section 1256 contract
component, use Part II to reduce the loss
by any unrecognized gain on the nonsection 1256 contract component before
making an entry in Part I. You also must
reduce the loss from any section 1256
contract component of a straddle that
would be a mixed straddle if the positions
had been properly identified as such.

Box A. Mixed Straddle Election
Under section 1256(d), you can elect to
have the mark-to-market rules not apply to
section 1256 contracts that are part of a
mixed straddle. A mixed straddle is any
straddle in which at least one but not all of
the positions is a section 1256 contract. On
the day the first section 1256 contract
forming part of the straddle is acquired,
each position forming part of the straddle
must be clearly identified as being part of
such straddle. If you make this election, it

Box B. Straddle-By-Straddle
Identification Election

Make this election for mixed straddles
according to Temporary Regulations
section 1.1092(b)-3T(d) by clearly
identifying each position by the earlier of
(a) the close of the day the identified mixed
straddle is established or (b) the time the
position is disposed of. No straddle-bystraddle identification election may be
made for any straddle for which a mixed
straddle election was made or if one or
more positions are includible in a mixed
straddle account. If you are making or have
previously made this election, check box B.
If you make this election, any positions
you held on the day before the election are
deemed sold for their fair market value at
the close of the last business day before
the day of the election. For elections made
on or before August 18, 2014, take this
gain or loss into account when computing
taxable income for the year in which the
election was made. For elections made
after August 18, 2014, take this gain or loss
into account in the year you would have
reported the gain or loss if the identified
mixed straddle had not been established.
In addition, when the gain or loss that
accrued prior to the time the identified
mixed straddle was established is taken
into account, it will have the same
character it would have had if the identified
mixed straddle had not been established.
See Regulations section 1.1092(b)-6 for
details.
Each year you hold positions subject to
this election, you must mark to market your
section 1256 contracts and determine, in
accordance with Regulations sections
1.1092(b)-3T and 1.1092(b)-6, whether you
have a net gain or loss. If the net gain or
loss is attributable to a net non-section
1256 position, then the net gain or loss is
treated as a short-term capital gain or loss.
Enter it directly on Form 8949 and identify
the election. If the net gain or loss is
attributable to a section 1256 position,
enter the gain or loss in Part I of Form 6781
and identify the election.

Box C. Mixed Straddle Account
Election
Make this election according to Temporary
Regulations section 1.1092(b)-4T(f) to
establish one or more mixed straddle
accounts for 2019 by the due date (without
extensions) of your 2018 tax return. To
make this election, check box C and attach
to your return (or your request for an
extension of time to file) the statement
required by the regulations. Report the
annual account net gain or loss from a
mixed straddle account in Part II and
identify the election. See Temporary
Regulations section 1.1092(b)-4T(c)(4) for
limits on the total annual account net gain
or loss.

Form 6781 (2018)

Box D. Net Section 1256 Contracts
Loss Election
If you have a net section 1256 contracts
loss for 2018, you can elect to carry it
back 3 years. Corporations, partnerships,
estates, and trusts aren’t eligible to make
this election. Your net section 1256
contracts loss is the smaller of:
• The excess of your losses from section
1256 contracts over the total of (a) your
gains from section 1256 contracts plus (b)
$3,000 ($1,500 if married filing separately),
or
• The total you would figure as your shortterm and long-term capital loss carryovers
to 2019 if line 6 of Form 6781 were zero.
Use a separate Schedule D (Form 1040)
and Capital Loss Carryover Worksheet (in
Pub. 550) to figure this amount.
The amount you can carry back to any
prior year is limited to the smaller of:
• The gain, if any, that you would report on
line 16 of Schedule D (Form 1040) for that
carryback year if only gains and losses
from section 1256 contracts were taken
into account, or
• The gain, if any, reported on line 16 of
Schedule D (Form 1040) for that carryback
year.

Page

If you are completing an amended 2018
Form 6781 to carry back a net section
1256 contracts loss from 2019 or a later
year, report the carryback on line 1. Enter
“Net section 1256 contracts loss carried
back from” and the tax year in column (a),
and enter the amount of the loss carried
back to 2018 in column (b). See the
instructions for box D for details.

3

Line 9
Include this amount on Schedule D (Form
1040), line 11; or on Schedule D (Form
1041), line 11.
For other returns, enter it in Part II of a
Form 8949 with Box E checked (if you
received a Form 1099-B or substitute
statement for every transaction included on
line 1) or Box F checked (if you can’t check
Box E). Enter “Form 6781, Part I” on line 1
in column (a). Enter the gain or (loss) in
column (h). Leave all other columns blank.

DRAFT AS OF
November 5, 2018
DO NOT FILE

The amounts just described are figured
prior to any carryback from the loss year.
Also, the carryback is allowed only to the
extent it doesn’t increase or produce a net
operating loss for the carryback year. The
loss is carried to the earliest year first.
Make the election by checking box D
and entering the amount to be carried
back on line 6. To carry your loss back, file
Form 1045, Application for Tentative
Refund, or an amended return. Attach an
amended Form 6781 and an amended
Schedule D (Form 1040) for the applicable
years.
On the amended Forms 6781 for the
years to which the loss is carried back,
report the carryback on line 1 of that
year’s amended Form 6781. Enter “Net
section 1256 contracts loss carried back
from” and the tax year in column (a), and
enter the amount of the loss carried back
in column (b).

Line 4

If the Form 1099-B you received includes a
straddle or hedging transaction (as defined
in section 1256(e)(2)), you may need to
make certain adjustments listed next.
Attach a statement listing each of these
adjustments and enter the total(s) on line 4.
• The section 1256 contract part of a mixed
straddle, if you made any of the mixed
straddle elections.
• The amount of the loss, if you didn’t
make any of the mixed straddle elections
or the straddle wasn’t identified as a mixed
straddle and you had a loss on the section
1256 contract part that was less than the
unrecognized gain on the non-section 1256
contract part. If the unrecognized gain is
less than the loss, enter the unrecognized
gain. Use Part I for a loss on the disposition
of one or more positions that are part of a
mixed straddle and that are non-section
1256 positions if no disposition of a nonsection 1256 position in the straddle
would be a long-term capital gain or loss,
and the disposition of one or more section
1256 positions in the straddle would be a
capital gain or loss.
• The section 1256 contract part of a
hedging transaction. The gain or loss on a
hedging transaction is treated as ordinary
income or loss. See Pub. 550 for details.

Line 5
Partnerships enter the amount from line 5
on Form 1065, Schedule K, line 11.
Electing large partnerships enter the
amount from line 5 on Form 1065-B, Part
II, line 5. S corporations enter the amount
from line 5 on Form 1120S, Schedule K,
line 10. Lines 6 through 9 in Part I of Form
6781 don’t apply to partnerships or S
corporations and are left blank.

Line 6

Specific Instructions

See the instructions for box D.

Part I

Include this amount on Schedule D (Form
1040), line 4; or on Schedule D (Form
1041), line 4.
For other returns, enter it in Part I of a
Form 8949 with Box B checked (if you
received a Form 1099-B or substitute
statement for every transaction included on
line 1) or Box C checked (if you can’t check
Box B). Enter “Form 6781, Part I” on line 1
in column (a). Enter the gain or (loss) in
column (h). Leave all other columns blank.

Line 1
Include on line 1 all capital gains and
losses from section 1256 contracts open at
the end of your tax year or closed out
during the year. If you received a Form
1099-B, Proceeds From Broker and Barter
Exchange Transactions, or substitute
statement, include on line 1 the amount
from box 11 of each form. In column (a),
write “Form 1099-B” and the broker’s
name. List separately each transaction for
which you didn’t receive a Form 1099-B or
substitute statement, or received a Form
1099-B that isn’t for your tax year.

Line 8

Part II

Use Section A for losses from positions
that are part of a straddle. Generally, a
loss is allowed to the extent it exceeds the
unrecognized gain on offsetting positions.
The part of the loss not allowed is treated
as if incurred in the following year and is
allowed to the same extent. However, a
loss from a position established in an
identified straddle after October 21, 2004,
isn’t allowed. Instead, the basis of each
offsetting position in the identified straddle
that has unrecognized gain is increased by
the amount of the unallowed loss multiplied
by the following fraction:
The unrecognized gain (if any) on the
offsetting position
The total unrecognized gain on all positions
that offset the loss position in the identified
straddle.

4.

For more details, see Pub. 550, chapter

Use Section B for gains from positions
that are part of a straddle.
Don’t include in Part II a disposition of
any of the following.
• A position that is part of a hedging
transaction.
• A loss position included in an identified
straddle established before October 22,
2004, unless you disposed of all of the
positions making up the straddle.
• A loss position included in an identified
straddle established after October 21,
2004.
• A position that is part of a straddle if all of
the positions of the straddle are section
1256 contracts.

Line 10, Column (a)
Enter the property and delivery date, and
indicate whether the property is a long or
short position.

Line 10, Column (d)
For positions closed out or sold, enter the
closing price or sales price.

Form 6781 (2018)

Page

4

Line 10, Column (e)

Line 11b

Part III

For positions closed out or sold, enter the
cost or other basis plus commissions paid.
Include nondeductible interest and carrying
charges allocable to personal property that
is part of a straddle. If any part of an
unallowed loss from an offsetting position
established in an identified straddle after
October 21, 2004, increased your basis in
the position, also include that amount. See
Pub. 550 for details.

Include this amount on Schedule D (Form
1040), line 11; or on Schedule D (Form
1041), line 11.
For other returns, enter it in Part II of a
Form 8949 with Box F checked. Enter
“Form 6781, Part II” on line 1 in column (a).
Enter the (loss) as a negative number (in
parentheses) in column (h). Leave all other
columns blank.

Complete Part III by listing each position
(whether or not part of a straddle) that you
held at the end of the tax year (including
any position you are treated as holding
because it is held by a related party) if the
FMV of the position at such time exceeds
your cost or other basis as adjusted.
Don’t include positions that are part of
an identified straddle or hedging
transaction, property that is stock in trade
or inventory, or property subject to
depreciation used in a trade or business.

DRAFT AS OF
November 5, 2018
DO NOT FILE

Line 10, Column (f)

Include in this column any loss not allowed
in the prior year to the extent of the
unrecognized gain.

Line 10, Column (g)

Enter the unrecognized gain on positions
offsetting those in columns (a) through (f).
Include unrecognized gain on any position
you are treated as holding because it is
held by a related party. Figure the amount
to enter in this column by subtracting the
cost or other basis of the offsetting position
from the settlement price of that position
as of the close of the last business day of
your 2018 tax year.

Lines 11 and 13
Separate recognized gains and losses into
short-term and long-term. Attach a
separate statement for each. For
information about holding periods for
straddle positions, see Pub. 550 and
Temporary Regulations section
1.1092(b)-2T.
Attach separate statements for (a)
section 988 contracts that are part of a
mixed straddle, and (b) any gain on the
disposition or other termination of any
position held as part of a conversion
transaction (as defined in section 1258(c)).
Identify the net gain or loss and report it on
Form 4797, line 10.

Line 11a
Include this amount on Schedule D (Form
1040), line 4; or on Schedule D (Form
1041), line 4.
For other returns, enter it in Part I of a
Form 8949 with Box C checked. Enter
“Form 6781, Part II” on line 1 in column (a).
Enter the (loss) as a negative number (in
parentheses) in column (h). Leave all other
columns blank.

Line 13a

Include this amount on Schedule D (Form
1040), line 4; or on Schedule D (Form
1041), line 4.
For other returns, enter it in Part I of a
Form 8949 with Box C checked. Enter
“Form 6781, Part II” on line 1 in column (a).
Enter the gain in column (h). Leave all other
columns blank.

Line 13b

Include this amount on Schedule D (Form
1040), line 11; or on Schedule D (Form
1041), line 11.
For other returns, enter it in Part II of a
Form 8949 with Box F checked. Enter
“Form 6781, Part II” on line 1 in column (a).
Enter the gain in column (h). Leave all other
columns blank.
Collectibles gain or (loss). A collectibles
gain or (loss) is any long-term gain or
deductible long-term loss from the sale or
exchange of a collectible that is a capital
asset. Collectibles include works of art,
rugs, antiques, metals (such as gold, silver,
and platinum bullion), gems, stamps,
coins, alcoholic beverages, and certain
other tangible property.
If any of the gain or loss you reported in
Part II is a collectibles gain or (loss) and
you are filing Form 1040 or Form 1041,
follow the instructions below for the form
you file.

Form 1040. If you checked “Yes” on line
17 of Schedule D (Form 1040), include the
collectibles gain or (loss) from Part II on line
3 of the 28% Rate Gain Worksheet in the
Instructions for Schedule D (Form 1040).
Form 1041. If you must complete the
28% Rate Gain Worksheet in the
Instructions for Schedule D (Form 1041),
include the collectibles gain or (loss) from
Part II on line 3 of that worksheet.

Don’t complete Part III if you don’t have
a recognized loss on any position
(including section 1256 contracts).
Paperwork Reduction Act Notice. We
ask for the information on this form to
carry out the Internal Revenue laws of the
United States. You are required to give us
the information. We need it to ensure that
you are complying with these laws and to
allow us to figure and collect the right
amount of tax.
You are not required to provide the
information requested on a form that is
subject to the Paperwork Reduction Act
unless the form displays a valid OMB
control number. Books or records relating
to a form or its instructions must be
retained as long as their contents may
become material in the administration of
any Internal Revenue law. Generally, tax
returns and return information are
confidential, as required by section 6103.
The time needed to complete and file
this form will vary depending on individual
circumstances. The estimated burden for
individual taxpayers filing this form is
approved under OMB control number
1545-0074 and is included in the estimates
shown in the instructions for their individual
income tax return. The estimated burden
for all other taxpayers who file this form is
shown below.
Recordkeeping . . . . 10 hr., 31 min.
Learning about the
law or the form . . . . 1 hr., 57 min.
Preparing the form . . . 3 hr., 9 min.
Copying, assembling,
and sending the form
to the IRS . . . . . . . . 16 min.
If you have comments concerning the
accuracy of these time estimates or
suggestions for making this form simpler,
we would be happy to hear from you. See
the instructions for the tax return with
which this form is filed.