What is the net section 1256 contracts loss election?

If you have a net section 1256 contracts loss for 2025, you can elect to carry it back 3 years. The amount of your loss and the amount you can carry back are limited.

The amount you can carry back to any prior year is limited to the smaller of:

• The gain, if any, that you would report on Line 16 of Schedule D (Form 1040) for that carryback year if only gains and losses from section 1256 contracts were taken into account; or
• The gain, if any, reported on Line 16 of Schedule D (Form 1040) for that carryback year.

See the Form 6781 instructions for more details regarding this election.