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)

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

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 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, columns (h) and (i), 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, columns (f) and (g), 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 (2002)

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 all applicable boxes (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 3.

*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).

2 ( )

3

4

5

6

7

8

9

13a

11a

11b

13b

2002
Form 6781 (2002) 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

Part I

Line 1

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.

Specific Instructions

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 2003, by the due date (without

extensions) of your 2002 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 2002, 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:

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 received a Form

1099-B that is not for your tax year.

● Dealer securities futures contract.

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 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 2003 if line 6 of Form 6781

were zero. Use a separate Schedule D (Form

1040) and Capital Loss Carryover

Worksheet (on page D-6 of the Schedule D

instructions) 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

if only gains and lossess from section 1256

contracts were taken into account or

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

Schedule D for that carryback year.

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).
Form 6781 (2002) Page 3

Line 5

Part II

Use Section A for losses from positions that

are part of a straddle. A loss is allowed only

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, or

a disposition of a position that is part of a

straddle if all the positions of the straddle are

section 1256 contracts.

Column (a)

Column (d)

Line 10, Column (f)

Line 10, Column (i) and Line 12,

Column (g)

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).

● 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 8

Line 9

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 (g); Schedule D (Form 1041),

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 (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:

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)

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 are left blank.

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.

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.

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. 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 2002 tax year.

Enter in these columns the gain or (loss) for

28% rate transactions.

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 11 hr., 28 min.

Learning about the 

law or the form 2 hr., 9 min.

Preparing the form 3 hr., 22 min.

Copying, assembling,

and sending the form

to the IRS 16 min.

● 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 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 on line 4.

If you are completing an amended 2002

Form 6781 to carry back a net section 1256

contracts loss from 2003 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

2002 in column (b). See the instructions for

Box D for details.

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.

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.