How to enter Section 1256 Option Contracts

[Stonks]

Hi,

this is the first year I got "Regulated Futures Contracts, Foreign Currency Contracts, and Section 1256 Option Contracts" in my 1099-B. How should I enter those ? I know I have to go to Contracts and Straddles but the options in TurboTax do not match anything on my form.

My form has the following totals:

REGULATED FUTURES CONTRACTS                                                 AMOUNT
Profit or (loss) realized in 2020 - closed contracts                           $1,920
Unrealized Profit or (loss) on open contracts 12/31/2019             ($2,547)
Unrealized Profit or (loss) on open contracts 12/31/2020             $0.00
Aggregate profit or (loss) on contracts                                             $4,467

Should I go to Contracts and Straddles, make no elections in the first screen, check "Section 1256 contracts marked to market" in the second ? Then in the form, when asked the totals, should I just do:

Broker's Name: XYZ
8. Account Description: [anything I want]

11. Total Profits: 1920

11. Total Losses: 0
Special handling: None

I'm just wondering since my form totals and transactions don't show those names for boxes 8 / 11. I guess I should also ignore the "unrealized" sections of it or the sum which is weirdly adding the loss and gains (like if they were both positive).

Thanks,

[ReneeM7122]

You'll need to use Form 6781: Gains and Losses from Section 1256 Contracts and Straddles.

To view the form, under the Federal tab, type form 6781 in the search box.

Then Jump to Form 6781 and answer the questions.

About form 6781

Under normal circumstances, if you buy a stock at $100 per share and hold it for 10 years, you don't have to report any gains or losses until you sell it. With Section 1256 investments, IRS requires you to report actual or would-be gains and losses through the end of the year on Form 6781. The basics of Section 1256 investments are as follows:

• You report gains and losses—as a result of an actual sale or the fair market value—through December 31 of each year.
• You complete Form 6781 even if you keep the investments.
• The process of assigning fair market value to investments you continue to hold, and don’t sell, is called “mark to market.”
• For tax purposes, every Section 1256 gain or loss is treated as being 60% long term and 40% short term, no matter how long you own it.
  • Long-term gains, defined as those held for longer than one year, generally have more advantageous tax characteristics than short-term gains, which are held for one year or less.

Using Form 6781

Completing the form is similar to reporting any type of investment. Here’s the breakdown:

• Part I: Report your Section 1256 investment gains and losses at either the actual price at which you sold these investments or the "mark-to-market" price established on December 31.
• Part II: Report the gains and losses on your straddles, with losses reported in Section A and gains calculated in Section B.
• Part III: Meant for any unrecognized gains you have on positions held at the end of the tax year, but you only have to complete it if you have a recognized loss on a position.

Here is a TurboTax article about Section 1256 Contracts and Straddles.

[fanfare]

to file this correctly,

do not check any of the boxes.

Line 11 is entered . TurboTax provides two boxes Gain and Loss.

enter the amount on line 11 in the proper box.

(you must know if you had a gain or loss, right?)

For description, enter

"<broker>'s 1099-B"

That is all.

Note: This applies to TurboTax CD/Download, TurboTax Online.

I've never used TurboTax Business.

[Jim4AU]

I'm using TurboTax Business and trying to file a partnership return where I traded options on the SPX.  IMHO TT makes this much harder than it has to be. 

Why not just allow us to enter what's on the 1099-DIV?

[Jim4AU]

Sorry - it's actually 1099-B.

[larkomarko]

Hello,

i still cannot enter the Section 1256 gains from the broker.  They did not download in the import.  When i attempt to go directly to Form 6781 it sends me to Schedule E.  Could someone set up a link on how to get for Form 6781?

Thank You!!!

[larkomarko]

Thank you.  Your response was very helpful,

God bless you for sharing!!!

[berad]

What was the response...I'm having the same issue?

[berad]

figured it out...thanks for being tip of the sword

[spatel15]

Having a similiar issue - what was the resolution?

[Jim4AU]

IMO it is not resolved.  The way 1256 gains and losses is entered in TTB is very confusing and not intuitive at all.  I wish we could get someone at Intuit's attention about this.

[larkomarko]

Hi berad,

Could you share the solution?

Thank You!!!

[larkomarko]

Hi Jim4AU,

Did you ever figure out how to enter the 1256?

Thanks for your kindness

[Jim4AU]

A couple of weeks ago I was able to speak with someone at Intuit about the difficulty entering Section 1256 option trades in Turbotax Business.  They asked if I could open the tax return and show them via online meeting the details of the problem.  I didn't have time to do so that day and haven't since.  I'm going to try to call them again next week and I'll post here after I talk with them.

[tagteam]

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@Jim4AU wrote:

I'm going to try to call them again next week and I'll post here after I talk with them.

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How are you entering the transaction now in TurboTax Business. 

Are you using Forms Mode (I have to presume you are)? What, precisely, is the main issue you are facing?