Does the 60/40 Rule Apply If the Trader Has a Net Loss for the Year?

Yes, the 60/40 rule applies to both net gains and net losses from Section 1256 contracts. If a trader has a net loss, 60% of that loss is treated as a long-term capital loss and 40% as a short-term capital loss.

This loss can be used to offset other capital gains. Furthermore, a special carryback rule allows net Section 1256 losses to be carried back three years.