Straddle Gains and Losses on form 6781

[user17740432517]

When reporting straddles (stock and stock options) in Part II Section A and Section B of form 6781, should I enter sale of each leg, or aggregate multiple legs belong to the same Straddle?

[MelindaS1]

To complete sections A and B of Part II, you'll enter your closed contract positions separately, but you'll also include information about any unrealized gain on the offsetting position in section A column (g). The TurboTax input questions mirror the form boxes:

This way, any realized loss(es) can be deferred to the extent of the associated unrecognized / open straddle gain. And for closed positions, you'll need to enter the separate sale info (dates/basis/expenses) to properly calculate the gain or loss from that specific closed contract (leg) - rather than net or combine any offsetting transactions together. This also avoids any mix-up of tax treatment on closed contracts / sale transactions. 

This screen (below) is where you will complete the required Form 6781 Part II instruction "Attach a separate statement listing each straddle and its components." This is where you will identify the closed and open components from Part II / Part III as being legs of a specific straddle position:

IRS - Form 6781 Instructions

IRS - How To Report Gains and Losses (Form 6781)
 

Note: The software does not support all of the reporting required of dealers in regulated futures contracts. A dealer is someone who is licensed in securities, has an established place of business, and regularly purchases securities for resale to customers. Among other requirements, dealers must report gain or loss on the sale of regulated futures contracts as self-employment income on Schedule SE. 

[user17740432517]

@MelindaS1 Thank you for the reply. 

To confirm, if I have have multiple legs at losses, I will add them separately in form 6781 box 10. Is it expected that the same unrecognized gain will be used multiple times in multiple rows of box 10?

Fox example, I have three legs open at the same time. 

- leg 1: long stock A, unrecognized gain 1000 at EOY. 

- leg 2: PUT of stock A. Sold for loss of 1000. 

- leg 3: PUT of stock A at a different strike price. Sold for loss of 500. 

If I add leg 2 and 3 separately, do I fill in 1000 at column (g) for both of them? This will cause total loss 1500 being deferred and column (h) will be 0. 

If I combine leg 2 and 3, I’ll have 1500 loss in column (f) and 1000 at column (g), the recognized loss column (h) will be 500. 

[RobertB4444]

You can enter them as three separate transactions but the unrecognized gain should only be used once.  In the example that you give the net result is a $500 loss and that is indeed what the final result should be.