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5 year carryback for a 2018 Sec 1256 loss

Technical topics regarding tax preparation.
#1
CPACMA  
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Does the 5 year carryback for a 2018 loss apply to a 5 year carryback for a Section 1256 loss? And does a Section 475 election need to be in place in order to carryback the loss?
 

#2
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With the 475 election, doesn’t the 1256 character go away, and you have an ordinary loss?

Aren’t 1256 losses capital losses, which cannot be carried back? Or is this a corporate taxpayer?
 

#3
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It is my understanding a Section 1256 loss can be carried back, but only to offset Section 1256 gains.
 

#4
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After more reading, that’s what I’m seeing as well - taxpayer can elect to carryback three years. I don’t see an increased window from the TCJA.


https://www.forbes.com/sites/greatspecu ... dvantages/
 

#5
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Does the 5 year carryback for a 2018 loss apply to a 5 year carryback for a Section 1256 loss?


A 1256 net loss maybe elected to be carried back to the 3rd year preceeding the year of the net 1256 loss. 40% of the carryback loss is treated as ST and 60% as LT. Any loss not used in the 3rd carryback year maybe carried back to each of the next 2 years. A net 1256 loss is the lower of: net 1256 losses or the sum of capital loss carryovers in suceeding years. Therefore to make the election there must be a net capital loss carryover in the current year without regard to the election.
The amount of carrried back loss may only be used to the extent of the net 1256 gain in the carryback year. The net 1256 gain is the lower of: excess 1256 gains over losses or excess cap gain over cap losses for the year. Therefore if there is an overall net cap loss in the carryback year, no carryback to that year is allowed.
The elction is made on Form 6781.

And does a Section 475 election need to be in place in order to carryback the loss?

A separate 475 election depends on the instrument. Business traders may elect Section 475 MTM on Section 1256 contracts, but most elect it on securities only.The mark to market rule does not apply to forward contracts or hedging transactions. Forward contract gains and losses are apcital gains and losses. Hedging transactions result in ordinary gains and losses.
 


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