[1][2] For U.S. Federal income tax purposes, mark-to-market accounting is used for each 1256 contract as of the end of each tax year,[3] and such contracts are treated as sold for its fair market value on the last business day of such taxable year (i.e., as "closed").
[4] The Internal Revenue Service (IRS) is not clear on whether QQQ, DIA and SPY options should be treated as section 1256 contracts.
Because most futures contracts are held for less than the 12-month minimum holding period for long-term capital gains tax rates; the gain from any non-1256 contract will typically be taxed at the higher short-term rate.
Thus the 1256 Contract designation enhances the marketability based on the after-tax attractiveness of these products.
[7][8] To carry your loss back, file Form 1045, Application for Tentative Refund,[9] or an amended return.