Net section 1256 contracts loss Carryback to prior year

[Fateswarning]

I’m not sure of the calculation to carryback my net section 1256 contracts loss to a previous year.   

Form 6781 instructions say

Your net section 1256 contracts loss is the smaller of:
1.  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
2.  The total you would figure as your short-term and long-term capital loss carryovers to 2023 if line 6 of Form 6781 were zero.   I know how to get this number so we will only discuss the first option above.

How do I calculate the first option shown above? I interpret the rule to choose the calculation A below.  Is the correct method A or B?

A.  Excess net section 1256 contracts loss over gains -20,000

Capital gains stocks +2000  (ignore - the instructions above don’t mention stocks!)

Plus +3000

Excess net section 1256 contracts loss over gains -17,000  to carryback to previous year 

I found an old post and this is how they explained it in example. 

B.  Excess net section 1256 contracts loss over gains -20,000

Capital gains stocks  +2000

Net losses on both combined -18000

Plus +3000

Net section 1256 contract loss  -15000 to carryback to previous year.  This option is forcing you to take an overall 3000 loss on current taxes.

[Mike9241 · Accepted solution]

first of all there is a 3 year c/b for 1256 losses.

B.  Excess net section 1256 contracts loss over gains -20,000

Capital gains stocks  +2000

Net losses on both combined -18000

Plus +3000

Net section 1256 contract loss  -15000 to carryback to previous year.  This option is forcing you to take an overall 3000 loss on current taxes. That's because a taxpayer is allowed (required to use) $3,000 of capital losses against other income each year. so you are correct except if AGI (line 11)  is negative then less capital losses are actually used increasing the amount that can be carried back. example if AGI is a negative $2000 you are actually only using $1000 in the current year so the c/b $16K 

utilization in any carryback year provided it does not produce or increase a net operating loss

smaller of  1) line 16 schedule d (so this line must be positive) or 2) net 1256 gains for the year.