Gains and Losses From Section 1256
Contracts and Straddles

> See Instructions on back.

OMB No. 1545-0644

Form 6781 ~ 4990

Department of the Treasury

Internal Revenue Service > Attach to your tax return. eeeine No. 82
Name(s) shown on tax return, Identifying number
A. Cl Check here if you made the mixed straddle election under section 1256(d) this year or an earlier year.
B. Cl Check here if you made the straddle-by-straddle identification election under section 1092(b).
C. (J Check here to make the mixed straddle account election under section 1092(b).
D. C)_Check here if you elect to carry back a net section 1256 contracts loss.
Section 1256 Contracts Marked to Market
a. Identification of account b. LOSS ©. GAIN
1
—
2 Add column b and column, fine 1. : ae )
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) . . :
5 Combine lines 3 and 4. (If a net gain, skip line 6 and enter the gain on line 7. ) a ——a
6 If you have a net section 1256 contracts loss and checked box D, enter the amount to be carried back
7 Reduce line 5 by line 6 and enter the difference here. Partnerships and S Corporations see instructions .
8 Multiply line 7 by 40%, Enter as a short-term capital gain or (loss) on Schedule D. Identify 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!

Gains and Losses From Straddles (Attach a separate schedule listing each straddle and its components.)
Section A.—Losses From Straddles

| f. LOSS he Recognized
b. Date } ¢. Date e. Cost or if column e is g. Unrecognized loss. If column
} 4, Gross other basis more than 4, fis more than g,
a Descrptionof propery | entered intoor | closed aut sales price | plusexpense | enterdifterence. | Eemonotiseting | enter aitterence
acquire ° of sale Otherwise, enter pe Otherwise, enter
zero. zero.
10
11a Enter short-term portion of line 10, column h, here and on Schedule D. Identify as Form 6781, PartIl . i )
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
b. Date Date een
» Date c. Date 7 ther basi: it thane,
a. Description of property entered ntoor | closed out 4. Gross sales price Giucexpenseotaaie | ener difference, Othermse
acquired ‘or sold enter zero. .

12

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

GEMM Unrecognized Gains From Positions Held on Last Day of Tax Year (Memo Entry Only—See Instructions)
©. UNRECOGNIZED GAIN
a. Description of property

it column cis more
than d, enter difference.
Otherwise, enter zero.

d, Cost or other basis
as adjusted

¢. Fair market value on last
‘business day of tax year

b. Date
acquired

14

The time needed to complete and file this
form will vary depending on individual
circumstances. The estimated average time 1s:

Ifyou have comments concerning the
accuracy of these time estimates or
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simple, we would be happy to hear from

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

Paperwork Reduction Act Notice.—We ask Recordkeeping Qhrs.,49min. you. You can write to both the IRS and the
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States. You are required to give us this - he <.’ tax return with which this form is filed.
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complying with these laws and to allowusto Copying, assembling, and

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Form 6781 (1990)


Form 6781 (1990)

Page 2

Purpose of Form.—Form 6781 is used by all
taxpayers who held section 1256 contracts or
straddles.

Section 1256 contract.—A section 1256
contract is: (1) any regulated futures contract,
(2) any foreign currency contract, (3) any
nonequity option, and (4) any dealer equity
option. For definitions and more information,
see Pub. 550, Investment Income and
Expenses

Special rules apply to certain foreign
currency contracts. See section 988, and
Temporary Regulations sections 1.988-
17(a)(4) and 1.988-3T if an election is made
under section 988(c)(1)(D) or 988(a)(1)(B),
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 1s reported
on the return. If an election is made under
section 988(a)(1)(B), report the gains and
losses on Form 6781

Gain or loss from the trading of section
1256 contracts is treated as capital gain or
loss. However such transactions are subject
to self-employment tax. For more information,
see Pub, 533, Self-Employment Tax.

Straddle.—A straddle means offsetting
positions with respect to personal property.

Offsetting positions.—|f 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.

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

Mixed straddle election. —Under section
1256(d), 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 in which at least
‘one (but not ail) 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 made this election, it
will apply for all later years as well. It cannot
be revoked without the consent of the IRS. If
you made this election, check box A and report
the section 1256 component in Part Il instead
of Partl.

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: (1) the close of the day the identified
mixed straddle is established, or (2) the time
the position 1s 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 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 | of Form 6781 and
identify the election.

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 1991, by the due date (without extensions)
of your 1990 tax return. To make this election,
check box C and attach the statement required
by that regulation to your return. Report the
annual account net gain or loss from a mixed
straddle account in Part Il. See Temporary
Regulations section 1.1092(b)-4T(c)(4) for
fimits 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 tl 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 straddie which
would be a mixed straddle if the positions had
been properly identified as such.

Net section 1256 contracts loss election.—
if you have a net section 1256 contracts loss
for 1990, you 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 on line 6. To carry your loss back,
file an amended return, and attach an
amended Form 6781 for the applicable year

Parti

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 or equivalent
statement, include the amount from box 9 of
each form in column b orc of line 1, Form
6781, Incolumn 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

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.

Line 7.—Partnerships and S corporations
should enter this amount on Schedule K,
Forms 1065 and 1120S as Other Income
(Loss). Skip lines 8 and 9.

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 straddie. A loss is a!lowed only to
the extent it exceeds the unrecognized gain cn
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 Il 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 positicns of the straddle dre
section 1256 contracts.

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 Pub. 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 1990 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 Pub. 550 and Temporary Regulations
section 1.1092(b)-2T For section 988
contracts that are part of a mixed straddle,
attach a separate schedule. Identify the net
gain (income) or loss and state where it is
reported on the tax return

Part Ill

Section 1092 contains a reporting
requirement. You must complete Part Ill by
listing each position (whether or not part of a
straddie) that you held at the end of the tax
year (including any position you are treated as
holding because it 1s 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 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 I! if you do not have a
recognized loss on any position (including
regulated futures contracts).