6781 Gains and Losses From Section 1256
Form Contracts and Straddles
Departner ey D Tobe filed with Form 1040, 1041, 1065, 1120, 1120S, ete.

OMB No. 1545-0644

1985

Name(s) as 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. C1 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. O Check here if you elect to carryback a net section 1256 contracts loss.

EEX] Section 1256 Contracts Marked to Market

a. Identification of account b. LOSS

©. GAIN

Addcolumnbandcolumnc,linel. . . « ere «

Combine columns b and c of line 2 and enter the net gain or (loss) .
Form 1099-B adjustments (see instructions, attach schedule) .
Combinelines3and4.. . . -

2
3
4
5
6
7 Subtract line 6 from line 5 .
8

9

If you have a net section 1256 contracts loss and checked box D, enter the amount to be carried back

Multiply line 7 by 40%. Enter as a short-term capital gain or (loss) on Schedule D. Identify as Form 6781, Part |
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 h. Recognized
e. Cost or Ifcolumn eis loss. If column
Unrecognized
b. Date 4. Gross other basis more thand, 8. Bt fis more thang,
a. Description of property acquired ©. Date sold salespice | plusexpense | enterdifference. | S@nonoftsetting | enter difference.
ofsale Otherwise, enter pos Otherwise, enter

zero.

zero,

10

lla Enter short-term portion of line 10, column h here and on Schedule D. Identify as Form 6781, Partil.
b Enter long-term portion of line 10, column h here and on Schedule D. Identify as Form 6781, Partil .

Section B.—Gains From Straddles

b. Date

a. Description of property acquired c. Date sold d. Gross sales price e. Cost or other basis

plus expense of sale

£.GAIN
If column d is more than e,
enter difference. Otherwise,
enter zero.

12

13a Enter short-term portion of line 12, column f here and on Schedule D. 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 Il .

GRE) Unrecognized Gains From Positions Held on Last Day of Tax Year (Memo Entry Only—See Instructions)

. Fair market value on last 4. Cost or other basis

a. Description of property b. Date business day of tax year as adjusted

acquired

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

14

For Paperwork Reduction Act Notice, see back of form.

Form 6781 (1985)


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 individuals, partnerships, fiduciaries,
corporations, etc., that held section 1256
contracts or straddles. For more information,
see Publication 550, Investment Income and
Expenses.

Do not use Form 6781 to report hedging
transactions, as defined in section 1256(e).
Report them directly on your tax return. Any
gain or loss on a hedging transaction is treated
as ordinary income or loss. For limitation on
losses from hedging transactions see section
1256(e)(5).

Traders in section 1256 contracts, see
section 1256(f)(3).

Elections. —

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 I.

Straddle-by-straddle identification
election.—Make this election according to
Regulation section 1.1092(b)-3T(d) by
identifying each position before the close of the
day the identified mixed straddle is established,
or at or before 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. 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 1986, by the due
date (without extensions) of your 1985 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
toa 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 I.
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 1985 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!

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 on a 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 section 1256(g).

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 I. 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
1099-8 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 straddle 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 can not 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 section 1092 and Regulation
sections 1.1092(b)-1T and 5T.

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

Column b.—Enter the date you entered into
or acquired the position.

Column c.—Enter the date you closed out or
sold the 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 section 263(g) for definition of
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 1985 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 the holding
period for straddle positions, see Regulation
section 1.1092(b)-2T.

Part Ill

Section 1092 contains a reporting
requirement. You must complete Part II 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.