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 the amounts on line 1 in columns (b) and (c)

4

5

Form 1099-B adjustments. See instructions and attach schedule

Combine lines 3 and 4

If you have a net section 1256 contracts loss and you checked box D above, enter the amount of that loss

to be carried back, as a positive number

6

7 Combine lines 5 and 6

Short-term capital gain or (loss). Multiply line 7 by 40% (.40). Enter here and include on the appropriate line

of Schedule D (see instructions)

8

Long-term capital gain or (loss). Multiply line 7 by 60% (.60). Enter here and include on the appropriate line

of Schedule D (see instructions)

9

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 the short-term portion of losses from line 10, column (h), here and include on the appropriate line of

Schedule D (see instructions)

( )

Enter the long-term portion of losses from line 10, column (h), here and include on the appropriate line of

Schedule D (see instructions)

b

Section B—Gains From Straddles

(f) Gain. If column

(d) is more than (e),

enter difference.

Otherwise, enter -0-

12

Enter the short-term portion of gains from line 12, column (f), here and include on the appropriate line of

Schedule D (see instructions)

13a

b Enter the long-term portion of gains from line 12, column (f), here and include on the appropriate line of

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 (2004)

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

(d) Gross

sales price (a) Description of property

(a) Description of property (b) Date 

acquired

Cat. No. 13715G

Check all applicable boxes (see instructions).

(c) Gain

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.

13a

11a

11b

13b

3

4

5

6

7

8

9

2004

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

2 ( )
Form 6781 (2004) Page 2

Box C. Mixed Straddle

Account Election

Note. If you did not make any of 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 also must 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

Offsetting Positions

Box A. Mixed Straddle

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 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.

General Instructions

Section references are to the Internal

Revenue Code unless otherwise noted.

Purpose of Form

● Any gain or loss on section 1256

contracts under the mark-to-market

rules, and

Section 1256 Contract

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 details on section 1256 contracts

and straddles, see 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

Mark-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 (FMV)

on the last business day of the tax year.

The wash-sale rules do not apply.

A straddle means offsetting positions

with respect to personal property of a

type that is actively traded.

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 and

may be part of a straddle. However, if an

identified straddle is properly

established, other positions held by the

taxpayer will not be treated as offsetting

with respect to any position which is

part of the identified straddle.

A section 1256 contract is any:

For definitions of these terms and

more details, see section 1256(g) and

Pub. 550.

Use Form 6781 to report:

● Regulated futures contract,

● Foreign currency contract,

● Nonequity option,

● Dealer equity option, or

Under section 1256(d), you may elect to

have the mark-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. On the day the first section

1256 contract forming part of the

straddle is acquired, each position

forming part of the straddle must be

clearly identified 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.

Make this election for mixed straddles

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

for 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.

Box B. Straddle-By-Straddle

Identification Election

Make this election according to

Temporary Regulations section

1.1092(b)-4T(f) to establish one or more

mixed straddle accounts for 2005, by

the due date (without extensions) of your

2004 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 have a net section 1256 contracts

loss for 2004, you may elect to carry it

back 3 years. Corporations,

partnerships, estates, and trusts are not

eligible to make this election. Your net

section 1256 contracts loss is the

smaller of:

● Dealer securities futures contract.

● The excess of your losses from

section 1256 contracts over the total of

(a) your gains from section 1256

contracts plus (b) $3,000 ($1,500 if

married filing separately), or

● The total you would figure as your

short-term and long-term capital loss

carryovers to 2005 if line 6 of Form 6781

were zero. Use a separate Schedule D

(Form 1040) and Capital Loss Carryover

Worksheet (in Pub. 550) to figure this

amount.

The amount you may carry back to

any prior year is limited to the smaller of:

● The gain, if any, that you would report

on line 17 of Schedule D for that

carryback year (line 17a if the carryback

year is 2003) if only gains and losses

from section 1256 contracts were taken

into account, or

● The gain, if any, reported on line 17 of

Schedule D for that carryback year (line

17a if the carryback year is 2003).

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.

What’s New

New rules apply to positions established

in an identified straddle after October

21, 2004. See the instructions for Part II.
Form 6781 (2004) Page 3

Line 5

Part II

Use Section A for losses from positions

that are part of a straddle. Generally, a

loss is allowed 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. However, a loss from an

identified position established in an

identified straddle after October 21,

2004, is not allowed. Instead, the basis

Use Section B for gains from positions

that are part of a straddle.

Do not include in Part II a disposition

of any of the following.

Column (a)

Column (d)

Line 10, Column (f)

● 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 details.

Column (e)

Line 9

Line 10, Column (g)

Partnerships enter the amount from line

5 on Form 1065, Schedule K, line 11.

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 10. Lines 6 through 9 in

Part I do not apply to partnerships or S

corporations and are left blank.

Include this amount on Schedule D

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

(Form 1041), line 2; or enter it 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.

Include this amount on Schedule D

(Form 1040), line 11; or on Schedule D

(Form 1041), line 7; or enter it 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.

Enter the property and delivery date,

and indicate whether the property is a

long or short position.

For positions closed out or sold, enter

the closing price or sales price.

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. If any part of

an unallowed loss from an offsetting

position established in an identified

straddle after October 21, 2004,

increased your basis in the position, also

include that amount. See Pub. 550 for

details.

Include in this column any loss not

allowed in the prior year to the extent of

the unrecognized gain.

Enter the unrecognized gain on positions

offsetting those in columns (a) through

(f). Figure the amount to enter in 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 2004 tax year.

● The amount of the loss, if you did not

make any of the mixed straddle

elections or the straddle was not

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 no disposition of a

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.

Line 6

See the instructions for Box D.

Line 8

Part I

Line 1

Specific Instructions

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 11 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

received a Form 1099-B that is not for

your tax year.

Make the election by checking box D

and entering the amount to be carried

back on line 6. To carry your loss back,

file Form 1045, Application for Tentative

Refund, or an amended return. Attach an

amended Form 6781 and an amended

Schedule D for the applicable years.

The above amounts are figured prior

to any carryback from the loss year.

Also, the carryback is allowed only to

the extent it does not increase or

produce a net operating loss for the

carryback year. The loss is carried to the

earliest year first.

On the amended Forms 6781 for the

years to which the loss is carried back,

report the carryback on line 1 of that

year’s amended Form 6781. Enter “Net

section 1256 contracts loss carried back

from” and the tax year in column (a), and

enter the amount of the loss carried

back in column (b).

Line 4

● The regulated futures part of a mixed

straddle, if you made any of the mixed

straddle elections.

If the Form 1099-B you received

includes a straddle or hedging

transaction (as defined in section

1256(e)(2)), you may need to make

certain adjustments listed below. Attach

a schedule listing each of these

adjustments and enter the total(s) on

line 4.

If you are completing an amended

2004 Form 6781 to carry back a net

section 1256 contracts loss from 2005 or

a later year, report the carryback on line

1. Enter “Net section 1256 contracts loss

carried back from” and the tax year in

column (a), and enter the amount of the

loss carried back to 2004 in column (b).

See the instructions for Box D for

details.

● A position that is part of a hedging

transaction.

● A loss position included in an identified

straddle established before October

22, 2004, unless you disposed of all of

the positions making up the straddle.

● A loss position included in an identified

straddle established after October 21,

2004.

● A position that is part of a straddle if

all of the positions of the straddle are

section 1256 contracts.

of any offsetting position(s) in the

identified straddle that has unrecognized

gain is increased by the amount of the

unallowed loss.
Form 6781 (2004) Page 4

Lines 11 and 13

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 FMV 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, or property subject to

depreciation used in a trade or business.

Do not complete Part III if you do not

have a recognized loss on any position

(including regulated futures contracts).

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:

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.

Separate recognized gains and losses

into short-term and long-term. Attach a

separate schedule. For information about

holding periods for straddle positions,

see Pub. 550 and Temporary

Regulations section 1.1092(b)-2T. Attach

separate schedules 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.

Recordkeeping 10 hr., 31 min.

Learning about the 

law or the form 1 hr., 57 min.

Preparing the form 3 hr., 9 min.

Copying, assembling,

and sending the form

to the IRS 16 min.

Line 11a

Include this amount on Schedule D

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

(Form 1041), line 2; or enter it 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.

Line 11b

Include this amount on Schedule D

(Form 1040), line 11; or on Schedule D

(Form 1041), line 7; or enter it 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.

Line 13a

Include this amount on Schedule D

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

(Form 1041), line 2; or enter it 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.

Line 13b

Include this amount on Schedule D

(Form 1040), line 11; or on Schedule D

(Form 1041), line 7; or enter it 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.

Collectibles gain or (loss). A

collectibles gain or (loss) is any

long-term gain or deductible long-term

loss from the sale or exchange of a

collectible that is a capital asset.

Collectibles include works of art, rugs,

antiques, metals (such as gold, silver,

and platinum bullion), gems, stamps,

coins, alcoholic beverages, and certain

other tangible property.

If any of the gain or loss you reported

in Part II is a collectibles gain or (loss)

and you are filing Form 1040 or Form

1041, follow the instructions below for

the form you file.

Form 1040. If you checked “Yes” on

line 17 of Schedule D (Form 1040),

include the collectibles gain or (loss)

from Part II on line 3 of the 28% Rate

Gain Worksheet in the Instructions for

Schedule D (Form 1040).

Form 1041. If you must complete the

28% Rate Gain Worksheet in the

Instructions for Form 1041 and

Schedules A, B, D, G, I, J, and K-1,

include the collectibles gain or (loss)

from Part II on line 3 of that worksheet.