Reporting capital gains from futures trading is not quite the same as when trading stocks and options. Capital gains from trading IRS Section 1256 contracts such as commodity futures, index futures, and broad-based index options are reported by your brokerage 1099-B (or 1099-C for tax years prior to 2006).
According to IRS Publication 550:
A commodity futures contract is a standardized, exchange-traded contract for the sale or purchase of a fixed amount of a commodity at a future date for a fixed price. If the contract is a regulated futures contract, the rules described under Section 1256 contracts marked to market apply to it. The termination of a commodity futures contract generally results in capital gain or loss.
A Section 1256 contract is any:
IRS Publication 550, under the Non-equity option heading:
Non-equity options include debt options, commodity futures options, currency options, and broad-based stock index options. A broad-based stock index is based upon the value of a group of diversified stocks or securities (such as the Standard and Poor's 500 index).
The good news for traders of Section 1256 contracts is twofold:
Section 1256 contracts are reported on IRS Form 6781. Part I, Line 2 of this form simply asks for your total gain or loss, and then it splits this loss as 40% short-term on Line 8 and 60% long-term on Line 9. These entries then flow to your Schedule D - Part I, Line 4 for short-term capital gains and Part II, Line 11 for long-term capital gains.
No additional detail or complex matched trade report (as required for capital gains from stocks, options, etc.) is required.
TradeLog imports futures trades from select brokers, handles necessary year-end mark to market adjustments and generates necessary totals for Form 6781 reporting.
Although brokers often report the totals for futures trading on 1099-B, they usually do not identify and segregate broad-based index options which should be reported with your futures trading. Read our broad-based index options page to learn more.
Please note: This information is provided only as a general guide and is not to be taken as official IRS instructions. Cogenta Computing, Inc. does not make investment recommendations nor provide financial, tax or legal advice. You are solely responsible for your investment and tax reporting decisions. Please consult your tax advisor or accountant to discuss your specific situation.