OMB No. 1545-0644 Gains and Losses From Section 1256

Contracts and Straddles Form 6781

Department of the Treasury

Internal Revenue Service

Attachment

Sequence No. 82 © Attach to your tax return.

Name(s) shown on tax return Identifying number

A Mixed straddle election

B Straddle-by-straddle identification election

C Mixed straddle account election

D Net section 1256 contracts loss election

Section 1256 Contracts Marked to Market

(a) Identification of account (b) (LOSS)

1

2 Add amounts on line 1 in columns (b) and (c)

3 Net gain or (loss). Combine columns (b) and (c) of line 2

4 Form 1099-B adjustments. See instructions and attach schedule

5 Combine lines 3 and 4

If you have a net section 1256 contracts loss and checked box D, enter the amount to be carried

back 

6

7 Subtract line 6 from line 5

8 Short-term capital gain or (loss). Multiply line 7 by 40%. Enter here and on Schedule D. See instructions

9 Long-term capital gain or (loss). Multiply line 7 by 60%. Enter here and on Schedule D. See instructions

Gains and Losses From Straddles. Attach a separate schedule listing each straddle and its components.

Section A—Losses From Straddles

(h) RECOGNIZED

LOSS. If column

(f) is more than

(g), enter

difference.

Otherwise, enter

-0-

(f) LOSS.

If column (e) is

more than (d),

enter difference.

Otherwise,

enter -0-

(e) Cost or

other basis

plus

expense of

sale

(g)

Unrecognized

gain on

offsetting

positions

(c) Date 

closed out

or sold

(b) Date 

entered

into or

acquired

(d) Gross

sales price (a) Description of property

10

11a Enter short-term portion of line 10, column (h), losses here and on Schedule D. See instructions ( )

b Enter long-term portion of line 10, column (h), losses here and on Schedule D. See instructions ( )

Section B—Gains From Straddles

(f) GAIN. If column (d) is

more than (e), enter

difference. Otherwise,

enter -0-

12

13a Enter short-term portion of line 12, column (f), gains here and on Schedule D. See instructions

b Enter long-term portion of line 12, column (f), gains here and on Schedule D. See instructions

Unrecognized Gains From Positions Held on Last Day of Tax Year. Memo Entry Only—See instructions.

(e) UNRECOGNIZED GAIN.

If column (c) is more 

than (d), enter difference.

Otherwise, enter -0-

(d) Cost or other basis 

as adjusted

(c) Fair market value on last

business day of tax year

14

Form 6781 (1998)

Part I

Part II

Part III

(e) Cost or other

basis plus expense of

sale

(c) Date 

closed out

or sold

(b) Date 

entered

into or

acquired

(a) Description of property (d) Gross sales price

(a) Description of property (b) Date 

acquired

Cat. No. 13715G

Check applicable box(es) (see instructions):

(c) GAIN

*(i) 28% RATE

LOSS (see

instr. below)

*(g) 28% RATE GAIN

(see instr. below)

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

see instructions.

( )

For Paperwork Reduction Act Notice, see page 4.

1998

*28% Rate Gain or Loss includes all “collectibles gains and losses” and up to 50% of the eligible gain on qualified small

business stock. See Instructions for Schedule D (Form 1040).

( )
Form 6781 (1998) Page 3

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 1999, by

the due date (without extensions) of your

1998 tax return. To make this election,

check box C and attach to your return

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.

If you did not make the above

elections, and you have a loss on the

section 1256 component, use Part II to

reduce the loss by any unrecognized

gain on the non-section 1256

component before making an entry in

Part I. You must also reduce the loss

from any section 1256 component of a

straddle that would be a mixed straddle

if the positions had been properly

identified as such.

Box D. Net section 1256 contracts

loss election. If you have a net section

1256 contracts loss for 1998, you may

elect to carry it back 3 years. The

amount that may be carried back cannot

be more than the net section 1256

contracts gain in the year to which the

loss is carried. The loss is carried to the

earliest year first. See section 1212(c) for

definitions of net section 1256 contracts

loss and net section 1256 contracts

gain. Make the election by checking box

D and entering the amount to be carried

back on line 6. To carry your loss back,

file an amended return, and attach an

amended Form 6781 for the applicable

year.

Offsetting positions. 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. Any position that

is not part of an identified straddle

cannot offset any position that is part of

an identified straddle.

Part I

Line 1. Include on line 1 all 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

equivalent statement, include on line 1

the amount from box 9 of each form. In

column (a), write “Form 1099-B” and the

broker’s name. List separately each

transaction for which you did not receive

a Form 1099-B or equivalent statement,

or if the Form 1099-B you received is

not for your tax year.

Box A. Mixed straddle election. Under

section 1256(d), you may elect to have

the marked-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. Each position forming part of

the straddle must be clearly identified,

on the day the first section 1256

contract forming part of the straddle is

acquired, as being part of such straddle.

If you make this election, it will apply for

all later years and cannot be revoked

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.

Line 4. If the Form 1099-B you received

includes a straddle or hedging

transaction (as defined in section

1256(e)(2)), it may be necessary to make

certain adjustments listed below. Attach

a schedule listing each of these

adjustments and enter the total on

line 4:

Box B. Straddle-by-straddle

identification election. Make this

election 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-by-straddle identification

election may be made for any straddle in

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 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 Schedule D 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.

Instructions

Section references are to the Internal

Revenue Code unless otherwise noted.

Purpose of Form. Use Form 6781 to

report:

● Any gain or loss on section 1256

contracts under the marked-to-market

rules; and

Section 1256 contract. A section 1256

contract is (a) any regulated futures

contract, (b) any foreign currency

contract, (c) any nonequity option, and

(d) any dealer equity option. For

definitions of these terms and more

details, see section 1256(g) and Pub.

550.

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),

showing the net gain or loss reported

from those contracts, and identifying

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.

● Gains and losses under section 1092

from straddle positions.

For more details on section 1256

contracts and straddles, get Pub. 550,

Investment Income and Expenses.

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).

Straddle. A straddle means offsetting

positions with respect to any property.

Marked-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 on the last business

day of the tax year.

A Change To Note

28% Rate Gain or Loss. A 28% rate

gain or loss is any gain or loss from

sales, exchanges, or conversions of

collectibles and qualified small business

stock. See the Instructions for Schedule

D (Form 1040) for more details.

● The regulated futures part of a mixed

straddle if you made any of the mixed

straddle elections.

● The amount of the loss if you did not

make any of the mixed straddle

elections or the straddle wasn’t

identified as a mixed straddle and you

had a loss on the regulated futures part

that was less than the unrecognized

gain on the nonregulated futures 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 the disposition of no

non-section 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.
Form 6781 (1998) Page 4

Line 5. Partnerships enter the amount

from line 5 on Form 1065, Schedule K,

line 7. 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 6. Lines 6 through 9 in

Part I do not apply to partnerships or S

corporations and should be left blank.

Part II

Use Section A for losses from positions

that are part of a straddle. A loss is

allowed only 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.

Use Section B for gains from positions

that are part of a straddle.

Do not include in Part II a disposition

of one or more positions that are part of

a hedging transaction, a disposition of a

loss position included in an identified

straddle, and a disposition of a position

that is part of a straddle if all the

positions of the straddle are section

1256 contracts.

Column (a). Enter the property, delivery

date, and indicate whether the property

is a long or short position.

Column (d). For positions closed out or

sold, enter the closing price or sales

price.

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 (i) and line 12, column

(g). Enter in these columns the gain or

(loss) for 28% rate transactions as

explained in A Change to Note on

page 3.

Lines 11 and 13. Separate recognized

gains and losses into short-term and

long-term. Attach a separate schedule.

For information about the holding period

for straddle positions, see Pub. 550 and

Temporary Regulations section

1.1092(b)-2T. Attach a separate schedule

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.

Part III

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 fair market value of

the position at such time exceeds your

cost or other basis as adjusted.

Do not include positions that are part

of an identified straddle or hedging

transaction, property that is stock in

trade or inventory, and property used in

a trade or business subject to

depreciation.

Do not complete Part III if you do not

have a recognized loss on any position

(including regulated futures contracts).

● The regulated futures part of a

hedging transaction. The gain or loss on

a hedging transaction is treated as

ordinary income or loss. See Pub. 550

for more details.

Column (e). 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. See Pub. 550

for more details.

Line 8. Include this amount on Schedule

D (Form 1040), line 4; Schedule D (Form

1041), line 2; or enter the amount as a

short-term capital gain or (loss) on the

Schedule D for your return (and enter

“Form 6781, Part I” in column (a) of that

Schedule D).

Line 9. Include this amount on Schedule

D (Form 1040), line 11, column (f);

Schedule D (Form 1041), line 7, column

(f); or as a long-term capital gain or

(loss) on the Schedule D for your return

(and enter “Form 6781, Part I” in column

(a) of that Schedule D). Include the line 11a amount on

Schedule D (Form 1040), line 4;

Schedule D (Form 1041), line 2; or as a

short-term capital loss on the Schedule

D for your return (and enter “Form 6781,

Part II” in column (a) of that Schedule

D).

Include the line 11b, columns (h) and

(i) amounts on Schedule D (Form 1040),

line 11, columns (f) and column (g);

Schedule D (Form 1041), line 7, columns

(f) and (g); or only the column (h) amount

as a long-term capital loss on the

Schedule D for your return (and enter

“Form 6781, Part II” in column (a) of that

Schedule D).

Include the line 13a amount on

Schedule D (Form 1040), line 4;

Schedule D (Form 1041), line 2; or as a

short-term capital gain on the Schedule

D for your return (and enter “Form 6781,

Part II” in column (a) of that Schedule

D).

Include the line 13b, columns (f) and

(g) amounts on Schedule D (Form 1040),

line 11, columns (f) and column (g);

Schedule D (Form 1041), line 7, columns

(f) and (g); or only the column (f) amount

as a long-term capital gain on the

Schedule D for your return (and enter

“Form 6781, Part II” in column (a) of that

Schedule D).

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.

The time needed to complete and file

this form will vary depending on

individual circumstances. The estimated

average time is: Recordkeeping, 11 hr.,

14 min.; Learning about the law or the

form, 2 hr., 33 min.; Preparing the

form, 3 hr., 47 min.; Copying,

assembling, and sending the form to

the IRS, 16 min.

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.

Line 10, column (g). Enter the

unrecognized gain on positions offsetting

those in columns (a) through (f). Figure

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 1998 tax year.