Question

Can Section 1256 losses be carried forward like ordinary capital gains losses

Forum|Forum|4 years ago
October 6, 2021
1 reply
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Can Section 1256 losses be carried forward like ordinary capital gains losses? I haven't seen any definitive IRS text that allows this, only discussing the 3 year carryback period.

If the losses can be carried forward, can they be used to offset regular capital gains or can they only be used against other Section 1256 capital gains? This is the first time I've come across these in my new brokerage (my old one characterized these same types of trades as normal capital/gains losses), and so I want to know what the rules are for things classified as Section 1256 in order to make the best decision on how to characterize these losses as it seems like the jury is in the air on these particular options trades.

Not A Product Question

A

Anonymous_

Employee

The carryback provision is an election made on Form 6781.

See https://www.irs.gov/pub/irs-access/f6781_accessible.pdf

Otherwise, you can carry forward losses to the following tax year.

T

tharp993Author

Does that loss carryforward only apply to future Section 1256 gains or can it be applied to ordinary capital gains? The reason I ask is that when I put my 1256 losses down in turbotax, my overall loss carryforward capital gains figure does not change.