Form 6781: Gains and Losses from Section 1256 Contracts and Straddles

Not A Clue

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Feb 19, 2024, 12:22:32 PMFeb 19

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In Dec 2022, I bought a Call (option) on BSM due 1/9/2024 @ $17.50 Strike; and sold a Put on BSM due the same date @ $15.0 Strike. These are Section 1256 Contracts. [None of the contracts is hedging/offsetting/straddle transaction.]

On 12/31/2022, they were Marked to Market with a loss on both Options totalling $40.

In Oct, 2023, I closed out both options -- 3 days apart. I have a Loss on the Call of $150 and a Gain of $250 on the Put (both from the 12/31/2022 Marked to Market value) -- with a net gain of $100 between the two.

On the 1099-B, Section 1256 reports $40 gains in Box 11 (the reversal of the 2022 Loss).

According to Form 6781 instructions, closing out the 1256 Contracts is reported in Part I. The $40 gain goes on Line 1. But I don't know where to the put the net gain of $100 (from 12/31/2022 Market Value). On Line 4?? If yes, what info do I put the the "attached statement"?

TIA

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Ira Smilovitz

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Feb 19, 2024, 9:29:15 PMFeb 19

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On Mon, 19 Feb 2024 12:20:53 -0500, Not A Clue wrote:

> In Dec 2022, I bought a Call (option) on BSM due 1/9/2024 @ $17.50
> Strike; and sold a Put on BSM due the same date @ $15.0 Strike. These
> are Section 1256 Contracts. [None of the contracts is
> hedging/offsetting/straddle transaction.]
>
> On 12/31/2022, they were Marked to Market with a loss on both Options
> totalling $40.
>
> In Oct, 2023, I closed out both options -- 3 days apart. I have a Loss
> on the Call of $150 and a Gain of $250 on the Put (both from the
> 12/31/2022 Marked to Market value) -- with a net gain of $100 between
> the two.
>
> On the 1099-B, Section 1256 reports $40 gains in Box 11 (the reversal
> of the 2022 Loss).
>
> According to Form 6781 instructions, closing out the 1256 Contracts is
> reported in Part I. The $40 gain goes on Line 1. But I don't know
> where to the put the net gain of $100 (from 12/31/2022 Market Value).
> On Line 4?? If yes, what info do I put the the "attached statement"?
>
> TIA

The 12/31/22 mark-to-market gains and losses should have been reported on
your 2022 tax return. Your 2023 return shows the gain or loss measured
from the 12/31/22 value.

Ira Smilovitz, EA
Leonia, NJ

Not A Clue

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Feb 20, 2024, 12:21:41 PMFeb 20

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On Monday, February 19, 2024 at 9:29:15 PM UTC-5, Ira Smilovitz wrote:
> On Mon, 19 Feb 2024 12:20:53 -0500, Not A Clue wrote:
>
> > In Dec 2022, I bought a Call (option) on BSM due 1/9/2024 @ $17.50
> > Strike; and sold a Put on BSM due the same date @ $15.0 Strike. These
> > are Section 1256 Contracts. [None of the contracts is
> > hedging/offsetting/straddle transaction.]
> >
> > On 12/31/2022, they were Marked to Market with a loss on both Options
> > totalling $40.
> >
> > In Oct, 2023, I closed out both options -- 3 days apart. I have a Loss
> > on the Call of $150 and a Gain of $250 on the Put (both from the
> > 12/31/2022 Marked to Market value) -- with a net gain of $100 between
> > the two.
> >
> > On the 1099-B, Section 1256 reports $40 gains in Box 11 (the reversal
> > of the 2022 Loss).
> >
> > According to Form 6781 instructions, closing out the 1256 Contracts is
> > reported in Part I. The $40 gain goes on Line 1. But I don't know
> > where to the put the net gain of $100 (from 12/31/2022 Market Value).
> > On Line 4?? If yes, what info do I put the the "attached statement"?
> >
> > TIA

> The 12/31/22 mark-to-market gains and losses should have been reported on
> your 2022 tax return. Your 2023 return shows the gain or loss measured
> from the 12/31/22 value.
>
> Ira Smilovitz, EA
> Leonia, NJ

Thank you, Ira. The MTM was reported in 2022. Now I have to report the gains/losses for closing the contracts in 2023 -- $150 loss + $250 Gains ( for a net gain of $100) since 12/31/2022 MTM.

And my question is where do I put those numbers -- on Line 4 as a adjustment -- with attached statement?

And since there are only 2 transactions, is there a way for me to put that info on F6781 itself -- instead of an attachment?

TIA

Ira Smilovitz

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Feb 20, 2024, 5:27:23 PMFeb 20

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This is not my area of expertise, but it seems to me that you would make a
single entry on line 1 for the net gain or loss upon closing the contracts
measured from the 12/31/2022 value.

Ira Smilovitz, EA
Leonia, NJ

Not A Clue

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Feb 20, 2024, 9:28:15 PMFeb 20

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According to the instrusctions for 6781, Line 1 should shows what is on 2023's 1099-B (which is the reversal of the unrealized loss @ 12/31/2024.. I guess I'll just put the net gains on Line 4. As long as I report the net gains, I should be safe?

Not A Clue

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Feb 21, 2024, 12:31:10 PMFeb 21

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Sorry, I spoke too soon. I forgot that this company change custodian in Sept. So there will be two 1099s for the same account. And I haven't yet received the other 1099 for this account. So it may be all on Line 1.