Updated October 19, 2026. Quick answer: Form 6781 reports gains and losses on section 1256 contracts under the mark-to-market rules, and gains and losses from straddles. Where section 1256 contracts produce capital gain or loss, the instructions treat it as 60% long term and 40% short term, regardless of how long the contract was held, and properly identified hedges are excepted. A net section 1256 contracts loss for 2025 can be carried back 3 years by election.
Quick reference
| Item | As the IRS form or instructions state it |
|---|---|
| Form and year read | Form 6781 for 2025, Gains and Losses From Section 1256 Contracts and Straddles |
| Long term share | “Multiply line 7 by 60% (0.60).” |
| Short term share | “Multiply line 7 by 40% (0.40).” |
| Treatment at year end | “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.” |
| Loss carryback election | “If you have a net section 1256 contracts loss for 2025, you can elect to carry it back 3 years.” |
| Loss threshold in the carryback formula | “$3,000 ($1,500 if married filing separately)” |
| Where it goes | “Attach to your tax return.” |
| Parts on the form | Part I (lines 1 to 9), Part II (lines 10 to 13) and Part III (line 14) |
What Form 6781 is for and who files it
The instructions give two uses for the form: “Use Form 6781 to report:” “Any capital gain or loss on section 1256 contracts under the mark-to-market rules” and gains and losses under section 1092 from straddle positions. For definitions the form sends readers to “Pub. 550, Investment Income and Expenses.”
The form has no filing rule of its own. It states “Attach to your tax return.” and so follows the return’s date. Options and commodities dealers have an added rule: “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.”
A reminder at the top concerns opportunity funds: “If you held a qualified investment in a qualified opportunity fund (QOF) at any time during the year, you must file your return with Form 8997.”
What counts as a section 1256 contract
The instructions define the term by a list: a section 1256 contract is any “Regulated futures contract”, “Foreign currency contract”, “Nonequity option”, “Dealer equity option”, or “Dealer securities futures contract.”
They also list what is not one: “A section 1256 contract doesn’t include any securities future contract, option on a securities future contract, interest rate swap, currency swap, basis swap, commodity swap, equity swap, equity index swap, credit default swap, interest rate cap, interest rate floor, or similar agreement.”
For fuller definitions the instructions cite “section 1256(g) and Pub. 550.” The Publication 550 page covers that guide.
The mark-to-market rules and the 60/40 split
The core rule is “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 instructions add “The wash sale rules don’t apply.”
The character of the result is fixed: “are treated as 60% long term and 40% short term, regardless of how long the contracts were held.” One exception is stated: “The mark-to-market rules don’t apply if you properly and timely identified a section 1256 contract as a hedge.”
This is why lines 8 and 9 exist. Line 8 is the short-term part and line 9 is the long-term part. The form tells the filer to “Multiply line 7 by 40% (0.40).” for line 8 and “Multiply line 7 by 60% (0.60).” for line 9. Those results go to Schedule D for a filer who is not deferring the amount because of a qualified opportunity fund investment, and other returns use Form 8949 as the form directs: “include this amount on Schedule D (Form 1040), line 4” for the short-term amount and “include this amount on Schedule D (Form 1040), line 11” for the long-term amount.
Part I, lines 1 to 9
Line 1 collects the activity: “Include on line 1 all capital gains and losses from section 1256 contracts open at the end of your tax year or closed out during the year.” A broker form feeds it: “include on line 1 the amount from box 11 of each form.”
Line 4 is a statement line. The form labels it “Form 1099-B adjustments. See instructions and attach statement”. Line 5 combines lines 3 and 4. For entities, “Partnerships enter the amount from line 5 on Form 1065, Schedule K, line 11.” and “S corporations enter the amount from line 5 on Form 1120-S, Schedule K, line 10.”
Lines 6 through 9 do not apply to those entities: “Lines 6 through 9 on Form 6781, Part I, don’t apply to partnerships or S corporations and are left blank.”
Box D: the net section 1256 contracts loss election
Box D is the carryback election: “If you have a net section 1256 contracts loss for 2025, you can elect to carry it back 3 years.” Eligibility is limited: “Corporations, estates, and trusts are not eligible to make this election.”
The loss amount is the smaller of two figures, and the first is “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 mechanics are stated in two sentences: “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.” The order is also fixed: “The loss is carried to the earliest year first.”
Where this comes from
The edition read for this page is Form 6781 (2025), which is the revision irs.gov served when it was read on 2026-10-19; check the revision printed on the form you file, because a later revision can change the lines and the election rules. This page describes Form 6781 (2025), Gains and Losses From Section 1256 Contracts and Straddles, as served on irs.gov on October 19, 2026. The IRS can revise a form after we read it, and the form you file and its own instructions control. Current and earlier revisions are listed on the IRS page Forms, Instructions and Publications. General information, not tax or legal advice.
Common mistakes
- Splitting a section 1256 result by holding period. The instructions say gains and losses are “regardless of how long the contracts were held.”
- Treating swaps as section 1256 contracts. The instructions say a section 1256 contract “doesn’t include any securities future contract” and list swaps among the exclusions.
- Assuming every taxpayer can carry a loss back. The instructions say “Corporations, estates, and trusts are not eligible to make this election.”
- Filling lines 6 through 9 as a partnership. The instructions say they “are left blank.”
Related: Form 8949, Schedule D, IRS Publication 550, wash sale rule, and Form 1040 line 7.
Sources
- Form 6781 (2025), Gains and Losses From Section 1256 Contracts and Straddles: https://www.irs.gov/pub/irs-pdf/f6781.pdf
Read from the IRS pages linked above on October 19, 2026. General information, not tax or legal advice. The IRS form and the instructions for your own form control, and your own facts decide the outcome.