6781 Gains and Losses From Section 1256
Form Contracts and Straddles
Department of the Treasury

Internal Revenue Service P Attach to your tax return

OMB No. 1545-0644

| 1986 ©

Attachment
Sequence No_ 82

Name(s) as shown on tax return Identifying number

A. (1 Check here if you made the mixed straddle election under section 1256(d) this year or an earlier year.
B. CI Check here if you made the straddle-by-straddle identification election under section 1092(b).

c. 0 Check here to make the mixed straddle account election under section 1092(b).

D. 1 Check here if you elect to carryback a net section 1256 contracts loss.

EZMqqJ Section 1256 Contracts Marked to Market
a. Identification of account b. LOSS ¢. GAIN
1
2 Addcolumnbandcolumnelinel. 2 2... eee
3 Combine columns b and c of line 2 and enter the net gain or (loss) .
4 Form 1099-B adjustments (see instructions, attach schedule) fo
5 Combine lines 3 and 4 Foe Fe _
6 If you have a net section 1256 contracts loss and checked box D, enter the amount to be carried back | )
7 Subtract line 6 from line 5 . soe er See
8 Multiply line 7 by 40%. Enter as a short-term capital gain or (loss) on Schedule D. Identity as Form 6781, Part |
9 Multiply line 7 by 60%. Enter as a long-term capital gain or (loss) on Schedule D. Identify as Form 6781, Part |

| Part 11] Gains and Losses From Straddles (Attach a separate schedule listing each straddle and its components.)

Section A.—Losses From Straddles

#. LOSS
. Cost or Ifcolumn eis
b. Date ¢. Date ht
| d. Gross other basis more than d,
a Description of property entered intoor | closed out sales price | plusexpense | enter difference.
a of sale Otherwise, enter

zero.

g- Unrecognized
gain on offsetting
positions

h. Recognized
loss. If column
fis more than g,
enter difference.
Otherwise, enter
zero.

10 |

1la_ Enter short-term portion of line 10, column h here and on Schedule D. Identify as Form 6781, Part Il . ( )
b Enter long-term portion of line 10, column h here and on Schedule D. Identify as Form 6781, Part Il . ( )
Section B.—Gains From Straddles
£.GAIN
b. Date c. Date
a. Description of property entered intoor | closed out d. Gross sales price bhatt featur d's mare than e.
acquired or sold q

enter zero,

12

13a_ Enter short-term portion of line 12, column f here and on Schedule D. Identify as Form 6781, Part II
b Enter long-term portion of line 12, column f here and on Schedule D. Identify as Form 6781, Part ll .

| Part 111 Unrecognized Gains From Positions Held on Last Day of Tax Year (Memo Entry Only—S.

ee Instructions)

rc ¢. Fair market value on last . Cost or other basis
a. Description of property a eate business day of tax year as adjusted

e. UNRECOGNIZED GAIN
If column cis more
than d, enter difference.
Otherwise, enter zero.

14

For Paperwork Reduction Act Notice, see back of form.

Form 6781 (1986)


Form 6781 (1986)

Page 2

Instructions

(Section references are to the Internal
Revenue Code, unless otherwise noted.)
Paperwork Reduction Act Notice.—We ask
for this information to carry out the Internal
Revenue laws of the United States. We need it
to ensure that taxpayers are complying with
these laws and to allow us to figure and collect
the right amount of tax. You are required to
give us this information.

Purpose of Form.—Form 6781 is to be used
by all taxpayers that held section 1256
contracts or straddles. For more information,
see Publication 550, Investment Income and
Expenses.

Gain or loss to traders of section 1256
contracts is treated as capital gain or loss.
However, such transactions are subject to
self-employment tax without the 60% capital
gain deduction

Do not use Form 6781 to report hedging
transactions. Report them directly on your tax
return. Any gain or loss on a hedging
transaction is treated as ordinary income or
loss. For information about hedging
transactions and the limitation on their losses,
see Publication 550.

Mixed straddle election. —You may elect not
to have the marked to market rules apply to
section 1256 contracts that are part of a mixed
straddle. A mixed straddle is any straddle, at
least one (but not all) of the positions of which 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 made this election, it will
apply for all later years as well. It cannot be
revoked without the consent of the
Commissioner. If you made this election, check
box A and report the section 1256 component in
Part Il instead of Part |

Straddle-by-straddle identification
election.—Make this election according to
Regulation section 1.1092(b)-3T(d) by clearly
identifying each position before the earlier of
the close of the day the identified mixed
straddle is established, or at or before the time
the position is disposed of. No straddie-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. See
Regulation section 1.1092(b)-3T for more
information, and treatment of gains and losses
from positions included in a mixed straddle for
which a straddle-by-straddle identification
election is made.

Mixed straddle account election. —Make this
election according to Regulation section
1.1092(b)-4T(f) to establish one or more mixed
straddle accounts for 1987, by the due date
(without extensions) of your 1986 tax return.
To make this election, check box C and attach
the statement required by that regulation to
your return. See Regulation section 1.1092(b)-
4T for more information, including definition of
mixed straddle account, and treatment of gains
and losses from positions in a mixed straddle
account. Also, see regulation 1.1092(b)-
4T(c)(4) for the limitation on the total annual
account net gain or loss.

In both the straddle-by-straddle identification
election and mixed straddle account election, 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 your 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 | of Form 6781 and identify the election.

If you did not make these elections, and you
have a loss on the section 1256 component,
use Part Il to reduce the loss by any
unrecognized gain on the non-section 1256
component before making an entry in Part |.
You must also reduce the loss from any
section 1256 component of a straddle which
would be a mixed straddle if the positions had
been properly identified as such,

Net section 1256 contracts loss election.—
An individual or partnership having a net
section 1256 contracts loss for 1986 may
elect to carry it back three years. The amount
which 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 definition 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 in line
6. To carry your loss back, file an amended
Form 6781 for the applicable year, together
with a Form 1040X or amended return.

Part I

Asection 1256 contract is (1) any regulated
futures contract, (2) any foreign currency
contract, (3) any nonequity option, and (4) any
dealer equity option.

Aregulated futures contract is a contract for
which the amount required to be deposited or
withdrawn depends ona system of marking to
market, and is traded on or subject to the rules
of a qualified board or exchange.

For definitions of qualified board or
exchange, foreign currency contract,
nonequity option, and dealer equity option,
see Publication 550.

Include in Part | all section 1256 contracts
open at the end of your tax year or closed out
during the year. If you receive a Form 1099-B
or equivalent statement, enter the amount
from box 9 of each form in columns b or c of
Form 6781, Part |. In column a of Form 6781,
Part |, write “Form 1099-B” and identify the
account by writing the broker's name.

On Form 6781, Part, list each transaction
separately for which you do not receive a Form
1099-B or equivalent statement, or if the Form
1099-B is not for your tax year. Describe each
transaction in column a.

Line 4.— If the Form 1099-B you receive
includes a straddle or hedging transaction, it
may be necessary to make certain
adjustments listed in (a) through (c) below.
Attach a schedule listing each adjustment and
enter the total on line 4.

(a) Enter the regulated futures part of a
mixed straddle if you made any of the mixed
straddle elections.

(b) If you did not make any of the mixed
straddle elections or the straddle wasn't
identified as a mixed straddle and you hada
loss on the regulated futures part which was
less than the unrecognized gain on the non-
regulated futures part, enter the amount of
the loss. If the unrecognized gain is less than
the loss, enter the unrecognized gain. Use Part
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.

(c) Enter the regulated futures part of a
hedging transaction.

Part Il

Attach a separate schedule listing each
straddle and its component positions.

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.

Use section B for gains from positions that
are part of a straddle.

Do not include in Part II dispositions of one
or more positions that are part of a hedging
transaction, a disposition of a loss position
included in an identified straddle or a mixed
straddle account, and disposition of a position
that is part of a straddle if all the positions of
the straddle are section 1256 contracts.
Straddle.—A straddie means offsetting
positions with respect to personal property.
Offsetting positions. —If there is a
substantial decrease in risk of loss toa
taxpayer holding a position because that
taxpayer or a related party also holds one or
more other positions, then those positions are
offsetting. If any position is not part of an
identified straddle, such position cannot be
treated as offsetting any position that is part of
an identified straddle.

For further information concerning
exceptions, definitions, related parties, flow
through entities, and specific rules as to the
tax treatment of gains and losses from
straddles, see Publication 550.

Column a.—Enter the personal property,
delivery date, and indicate whether the
property Is a long or short position .

Columns d and e.—For positions sold or closed
out, enter the sales price or closing price in
column d, and the cost or other basis plus
commissions paid in column e. Include in column
e interest and carrying charges properly allocable
to personal property that is part of a straddle.
You cannot deduct these expenses. See
Publication 550 for more information about
interest and carrying charges.

Section A, column f.—Include in this column
any loss not allowed in the prior year to the
extent of the unrecognized gain

Section A, 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 1986 tax year. Do not
enter less than zero.

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 Publication 550 and Regulation section
1.1092(b)-2T.

Part Ill
Section 1092 contains a reporting requirement.
You must complete Part Ill 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 settlement
price of the position at such time exceeds your
cost or other basis as adjusted.
Do not include the following in Part III
© Positions that are part of an identified
straddle;
© Property that is stock in trade or inventory;
© Positions that are part of a hedging
transaction;
© Property used in a trade or business
subject to depreciation
If you do not have a loss on any position
(including a regulated futures contract) for the
entire tax year, or your only loss was on a
position listed above, do not complete this part.