Section 1256 Contracts and Straddles

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A section 1256 contract is any:

• Regulated futures contract
• Foreign currency contract
• Nonequity option
• Dealer equity option, or
• Dealer securities futures contract

Section 1256 contracts do NOT include any of the following: securities future contract, option on a securities future contract, interest rate swap, currency swap, basis swap, commodity swap, equity swap, equity index swap, credit default swap, interest rate cap, interest rate floor, or similar agreement.

Report any gain or loss on section 1256 contracts under the mark-to-market rules. Also report any gains and losses under section 1092 from straddle positions.

See Publication 550  for more information.