Futures regulation
How does tax compliance protocol Section 1256 automate 60/40 capital gains splits on standard consolidated reporting documentation?
By Easy Money Scanner · Educational reference · Not investment advice
The short answer
Under US tax law, IRS Section 1256 contracts — which include most CFTC-regulated US futures contracts (regulated futures contracts, or RFCs) — are marked-to-market annually and taxed at a blended 60% long-term / 40% short-term capital gains rate, reported on IRS Form 6781.
How it works
This blended rate applies regardless of actual holding period, but only to qualifying Section 1256 contracts (it generally excludes securities futures and some swaps); this is strictly a US Internal Revenue Code rule and has no bearing on Canadian tax law.
An example
A US-resident futures trader reports annual Section 1256 gains/losses on IRS Form 6781.
Risk & limitations
This is US federal tax law only. Canadian traders are taxed under CRA rules (generally as business income or capital gains under the Income Tax Act), not the US 60/40 Section 1256 treatment; consult a qualified tax professional for cross-border situations.
Examples are hypothetical, not trade recommendations. US contract and regulatory references do not automatically apply in Canada. Rules, margin requirements and broker policies can change; confirm them with the relevant authority and your broker.