Futures contract taxation

Anonymous · ‎March 20, 2021

I purchased a S&P 500 Futures contract in 2020 which I sold in Mar 2021. For 2020 taxes, do I need to pay taxes on the unrealized gains till Dec 2020? I got a Substitute 1099 form" from E-trade.

Mike9241 · ‎March 21, 2021

yes. an S&P futures contract comes under the definition of 1256 contract. for 1256 contracts at the end of the year gain or loss must be figured and reported by computing its market value and comparing to its cost

the net is reported under the contracts and straddles section of Turbotax. it shows up on form 6781. 60% of any gain or loss is treated as long-term and 40% as short-term.

for some more info

https://www.tradelogsoftware.com/resources/filing-taxes/futures

View solution in original post

Mike9241 · ‎March 21, 2021

yes. an S&P futures contract comes under the definition of 1256 contract. for 1256 contracts at the end of the year gain or loss must be figured and reported by computing its market value and comparing to its cost

the net is reported under the contracts and straddles section of Turbotax. it shows up on form 6781. 60% of any gain or loss is treated as long-term and 40% as short-term.

for some more info

https://www.tradelogsoftware.com/resources/filing-taxes/futures

Anonymous · ‎March 21, 2021

Thanks @Mike9241 ! TurboTax populated the Part I "Section 1256 Contracts Marked to Market" but left the Part III section empty although all of my gain was unrealized. Actually I think it didn't even ask whether the gain is realized or unrealized. Should I manually fill Part III or it doesn't matter since it says "memo entry only"? Screenshots below.