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It’s a three-year carryback; unused amounts carry forward.

first, you must figure the eligible amount to carryback from the loss year

second, then you must figure the amount that can be used in the third prior year. the amount that can't be used carries forward to the second prior year and then the first. then any lft is carryforward but subject to the general rules for capital gains and losses.

 

I wonder why more folks don't do Sec 1256 trading? So many benefits especially from a Tax standpoint.

volatility. i have known traders that have ended up bankrupt.  consider future contracts for barrels of oil a few months back. the price was up to around $100 and has now fallen.  some traders probably bought at $100 only to see the price fall.  big positions would have taken big losses.