Form 6781 is an IRS form used to report gains and losses from straddles or Section 1256 contracts. These contracts can consist of regulated futures contracts, foreign currency contracts, options, dealer equity options, or dealer securities futures contracts. The form has two sections: one for straddles and another devoted to Section 1256 contracts.

To fill out Form 6781, you must accurately document your investment transactions. This includes the date each transaction took place, the type of contract involved, and the gross amount of the investment. You also need to provide any relevant section of the current tax code in order to properly report the gains or losses.

Once you have the necessary information, the form has four sections to complete. In the first section, you list your straddle transactions, including any dates when you opened or closed out straddles, their gross amounts, and their fair market values. The second section is where you report your Section 1256 contracts. This includes the type of contract, identified by its unique IRS code, as well as its inception date. You also need to provide any Section 1256 mark-to-market elections or elections to defer reporting of single index straddle losses for the current year.

The third section is where you total your Section 1256 gains and losses. You need to provide the section of the tax code that applies to these gains or losses as well as the amount of your net capital gain or loss. The fourth and final section is where you list the total of your straddle gains and losses.

Completing Form 6781 accurately and completely is crucial for reporting gains or losses from Section 1256 contracts or straddles. While the form is relatively simple, it requires precise details about your investments and investments transactions. For this reason, it’s often best to consult a certified public accountant or tax preparer to help you complete this form.