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How do I know what type of contracts or straddles to report here?

You may hold your investments for a few years and then sell them. When this happens, the IRS requires you to report the gain or loss on your tax return the year you sold them. It’s a different story when you have investments in contracts or straddles.

The terms “marked-to-market rules” or “mark-to-market rules” refer to an accounting rule.

Under these rules, if you hold a section 1256 contract at the end of the tax year, you generally must treat it as sold at its fair market value on the last business day of the tax year. 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.

These amounts should be reported on Form 6781, Gains and Losses From Section 1256
Contracts and Straddles.

See IRS Publication 550 for examples and what type of contracts and straddles should be reported.

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