Hello,
Can someone please provide the Section 1256 gain / loss algorithm for the following transactions which happen within a calendar year?
Investor sells a Section 1256 covered call contract which settles for the underlying secutiry (ie, not cash). Call premium is received for the sale.
On expiration date, the Section 1256 call contract is in the money (the strike price is below the underlying price). The contract is assigned, and Investor sells the underlying to the Section 1256 call holder.
What is the Section 1256 gain / loss of that transaction? Please include call premium received, and any Section 1256 mark to market gain / loss.
Thanks in advance!
I ask this question because my broker is telling me that Section 1256 contracts do not have mark to market losses when they are in the money and exercised by the call holder on expiration day. My broker says Section 1256 contracts have mark to market gain / loss accounting every day that they are active, but on expiration the mark to market loss of a losing section 1256 trade is always zero.
