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Tax form 6781 Part 3

Discussion in 'Options' started by status1, Feb 28, 2016.

  1. status1

    status1 Well-Known Member

    I entered my first butterfly trade (1 lot) on 12/31/2015 without realizing the tax consequences at the time
    I used the form 6781 before but usually I don't have any open position at the end of the year so I only have to fill out Part 1

    Now that I have an open position I have to fill out part 3 which is somewhat confusing given the 1099 form I received from my broker
    On that form it shows that all the options had a gain including the shorts which I don't see how that is possible since the market went down by the end of the day the 1099 form shows that I had an unrealized gain of about $1800 which I would have been happy to take it of if that really happened

    I am not sure where they got those numbers from but using the last price at the end of the day from the Think back in tos which I am not sure how accurate they are I got a gain of about $258 after subtracting the loss from the 2 shorts
    Looking at the p/l however at the end of the same day I got a loss of about $13 which I think is more accurate I think

    The 6781 form is kind of vague in that it says it's for Memo entry only and in the last column it says "e) Unrecognized gain. If column (c) is more than (d), enter difference. Otherwise, enter -0-"
    So apparently I am only supposed to enter the gains and not the losses ?
    Is this just to show the IRS how much gain I had but it's only a memo entry since it's not used in any calculation ?

    Did anyone else came across this part of the form ?
    Does this part of form make any sense or is this pretty much a waste of time ?
     
  2. ACS

    ACS Well-Known Member

    If you trade 1256 contracts then you should get a 1256 tax document from your broker. There is one number on that form which includes the P&L from all closed 1256 trades and any open 1256 positions on Dec 31st marked to market. Putting 1256 trades on a 1099 is making things complicated for no reason.
     
  3. status1

    status1 Well-Known Member

    The butterfly trade I made was in the RUT and while that is a form of a 1256 contract the 1099 is calling it regulated futures so I did not get any 1256 tax documents

    I understand that the mark to market rules saying that it will be treated as if it was closed on Dec 31st but what I don't understand is why does the short put contract have a positive number

    I sold 2 RUT 1110 puts on 12/31/2016 for 28.21 and the market went down that day which was also the mark to market day
    So according to the think back in TOS the bid/ask spread was about 31/34 at the end of the day so in any case this should have been a loss not a gain

    I contacted my broker about this but I did not get a straight answer so far
    I got some nonsense about "If you have an option that carries or into the new year, you will have a 1231 balance reporting that will be reported on form 6781"
    Yes, but what does that have to do with the shorts that have lost money having a positive value ?
    I replied to them so now I am waiting for the next answer

    I was wondering if anyone else here carried a trade over from last year in RUT or SPX and what did the 1099 statement show for the long and short positions Were they all positive including the losses ?
     
  4. status1

    status1 Well-Known Member

    So I got a reply from my broker but of course they never answered my question
    They start with telling me the rules "Per IRS rules, our clearing firm uses the fair market value for each contract"
    Than later on they say" Unfortunately we do not have those figures so we cannot tell you exactly what they are,"
    Thanks a lot
    So I just sent in the form without entering anything for that trade since it's only a memo entry and would only confuse things for next year
    This way at least next year when I do the taxes and use the form it will be a more accurate gain/loss
     
  5. status1

    status1 Well-Known Member

    So I got a new update on this
    I got an email today from my broker saying "As a part of an internal review of accounts at Apex, a reporting issue was discovered that may have impacted your 2015 tax information ?
    and that a new 1099 is available
    So I looked at it and sure enough it has the correct numbers now $1.02 not $1800 that they had before because they added all the prices together instead of subtracting the short premium from the longs in the RUT butterfly
    Of course they did not lift a finger when I told them about the problem a month ago
    I guess better late than never just a week before the filing
    Good thing I did not send those bogus numbers to the IRS
    Now I don't have to send a correction
     
  6. Andrei

    Andrei Well-Known Member

    If you ever listen to Robert Green of TraderTax talking about, his point is always "NEVER trust your broker to provide reliable information". I took his advise and started using TraderLog. It works well and handle many nuances (and nuisances) of the tax code as it relates to reporting trades.
     

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