Section 1256 contracts

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Section 1256 Contracts

Investments that fall under Section 1256 of the U.S. Tax Code, namely, any regulated futures contract, any foreign currency contract, any non-equity option, any dealer equity option, and any dealer securities futures contract. Section 1256 contracts are treated differently from other securities for tax purposes. Specifically, rather than waiting to tax them until they are sold, Section 1256 contracts are treated as if they were sold at market value on the last day of the tax year. This means that one may be liable for capital gains taxes on a Section 1256 contracts even though the positions are still open. See also: Form 6781.

Section 1256 contracts

Any of several types of futures and options contracts that are subject to a special tax rule of the Internal Revenue Service. Named for a section of the IRS Code, these contracts must generally be treated as if they are sold at fair market value on the last business day of the tax year. Section 1256 contracts include regulated futures contracts, foreign currency contracts, nonequity options, dealer equity options, and dealer securities futures contracts.
References in periodicals archive ?
On July 10, 1985, A enters into an offsetting section 1256 contract and makes a valid election to treat the straddle as a section 1092(b)(2) identified mixed straddle.
Section 1256 Contracts and Mark-to-Market Taxation 630 H.
Andrea Kramer of McDermott Will & Emery LLP discusses popular financial products and their uses; section 1256 contracts and the tax straddle rules; the mark-to-market rules; the special rules for commodities derivatives dealers; the tax treatment of supplies and tax hedges; and the effect Dodd-Frank has on certain popular financial products.
These sessions discussed varying topics such as financial crisis legislation affecting banks, status of interest expense allocation regulations, tax implications of new reserve requirements for variable annuities, insurance reserve updates, section 1256 creep, the Schering-Plough decision, and hedge fund and other debt equity issues.
Qualification under Section 1256 of the US IRS recognizes DME as qualified board or exchange, a statement from the DME said.
Access automatic gain and loss reporting for IRS Section 1256 securities, which are subject to special tax treatment.
Section 1256 requires any foreign currency contract held by a taxpayer at the end of the taxpayer's tax year or terminated or transferred during it to be marked to market.
Taxation as a Financial Instrument: Section 1256 973
With the designation of ICE Futures as a "qualified board or exchange" under Section 1256 of the Internal Revenue Code, contracts offered by ICE Futures will afford U.
For example, exceptions for mark-to-market adjustments under section 1256 should be considered.
Five forms (Schedule J; Forms 8271, Investor Reporting of Tax Shelter Registration Number; 8582-CR, Passive Activity Credit Limitation; 6781, Gains and Losses from section 1256 Contracts and Straddles; and 8586, Low-Income Housing Credit) will be added to e-filing for the 2000 filing season.
How Are Regulated Futures Contracts and other Section 1256 Contracts Taxed?