Gains and Losses From Section 1256
Contracts and Straddles

> See instructions on back.
> Attach to your tax return.

om 6781

Department of the Treasury
Internal Revenue Service

OMB No. 1545-0644

1991

Attachment
Sequence No. 82

Name(s) shown on tax return Identifying number
A. C1 Check here if you made the mixed straddle election under section 1256(d) this year or an earlier year.
B. (1 Check here if you made the straddle-by-straddle identification election under section 1092(b).
c. C1 Check here to make the mixed straddle account election under section 1092(b).
D. 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 (c) GAIN
1
2 Add amounts on line 1 in coumns(b)and(). . . 2... 2... Ub )
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 a net gain, skip line 6 and enter the gain on line 7.) Partnerships and $ corporations, see instructions
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 .
8 Multiply line 7 by 40%. Enter as a short-term capital gain or (loss) on Schedule D. Identify as Form 6781, Part |

su 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 straddi

le and its components.)

Section A.—Losses From Straddles

ec (f LOSS (h) RECOGNIZED
st or If column (e) is LOSS. If column (f)
wpate | foro | porns | SSB | NEOMIEIGLS | ig Urecognzns
i @, , 18 more than (g),
(0) Descrinton of property | entered into or | closed out | cates price | plus expense | enter difference. | 92!" on offsetting | ort aiference
a of sale Otherwise, enter Otherwise, enter
-0-. -0-.
10
11a 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 ( )
19)
Section B.—Gains From Straddles
GAIN
(b) Date (c) Date (e) Cost or other basis | if counts is more than
(a) Description of property eed or closed out (d) Gross sales price plus expense of sale (e), enter difference.

Otherwise, enter -0-.

12

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

Unrecognized Gains From Positions Held on Last Day of Tax Year (Memo Entry Only—See instructions)
{e) UNRECOGNIZED GAIN
(Dacron o opery myoae, | fata ae niet | (a Comore paie | Hour aor
Otherwise, enter -0-.
14
Instructions The time needed to complete and file this If you have comments concerning the

(Section references are to the Internal
Revenue Code unless otherwise noted.)
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Purpose of Form.—Use Form 6781 to report:
Any gain or loss on section 1256 contracts
under the marked-to-market rules; and

Cat. No. 13715G

Form 6781 (1991)


Form 6781 (1991)

Page 2

© Gains and losses under section 1092 from
straddle positions.

Do not report hedging transactions (as
defined in section 1256(e)(2)) on Form 6781.
They are not subject to the marked-to-market
rules.

For more information on section 1256
contracts, straddles, and hedging
transactions, get Pub. 550, Investment
Income and Expenses.

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.

Special rules apply to certain foreign
currency contracts. See section 988, and
Temporary Regulations sections 1.988-
1T(a)(4) and 1.988-3T. 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 the gains
and losses on Form 6781.

Gain or loss from the trading of section
1256 contracts is treated as capital gain or
loss. Options and commodities dealers must
take any such gain or loss into account in
figuring net earnings subject to
self-employment tax. See section 1402(i).
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.

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

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.

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 Il instead of Part |.

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 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 | of Form 6781
and identify the election.

Mixed straddle account election.—Make
this election according to Temporary
Regulations section 1.1092(b)-4T(A) to
establish one or more mixed straddle
accounts for 1992, by the due date (without
extensions) of your 1991 tax return. To make
this election, check box C and attach the
statement required by the regulations 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 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 |. 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.—
If you have a net section 1256 contracts loss
for 1991, 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.

Part |

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) or (c) of line 1, Form
6781. 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.

Line 4.—I!f the Form 1099-B you received
includes a straddle or hedging transaction, it
may be necessary to make certain
adjustments listed below. Attach a schedule
listing each adjustment and enter the total on
line 4.

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

© Enter 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 non-regulated
futures part. 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.

Enter the regulated futures part of a
hedging transaction.

Line 5.—Partnerships enter the amount from
line 5 on Form 1065, Schedule K, line 7.

S corporations enter the amount from line 5
on Form 1120S, Schedule K, line 6. Lines 6
through 9 in Part | do not apply to
partnerships and S corporations and should
be left blank.

Part Il

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 I! 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 persona! 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.

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
@) 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 1991 tax year.

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 or loss and state where it is
reported on the tax return.

Part Ill

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 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 lil if you do not have
a recognized loss on any position (including
regulated futures contracts).