# Explain the 60/40 Capital Gains Split in Simple Terms ⎊ Path

**Published:** 2025-12-05
**Author:** Greeks.live
**Categories:** Path

---

## Explain the 60/40 Capital Gains Split in Simple Terms.

The 60/40 capital gains split is a tax rule where 60% of the total net gain or loss from Section 1256 contracts is treated as long-term capital gain or loss. The remaining 40% is treated as short-term capital gain or loss.

This blend is often advantageous for traders because long-term gains are taxed at lower rates than short-term gains, which are taxed at ordinary income rates. This applies regardless of how long the contract was held.

- [Define the Terms “Debit Spread” and “Credit Spread.”](https://learn.greeks.live/path/define-the-terms-debit-spread-and-credit-spread/)

- [What Is the Current Maximum Long-Term Capital Gains Tax Rate?](https://learn.greeks.live/path/what-is-the-current-maximum-long-term-capital-gains-tax-rate/)

- [How Are Capital Gains Typically Classified for Crypto Spot Trading?](https://learn.greeks.live/path/how-are-capital-gains-typically-classified-for-crypto-spot-trading/)

- [Can a Trader Elect out of Section 1256 Treatment?](https://learn.greeks.live/path/can-a-trader-elect-out-of-section-1256-treatment/)

- [Does the 60/40 Rule Apply If the Trader Has a Net Loss for the Year?](https://learn.greeks.live/path/does-the-60-40-rule-apply-if-the-trader-has-a-net-loss-for-the-year/)

- [What Is the Tax Implication of Daily Futures Settlement?](https://learn.greeks.live/path/what-is-the-tax-implication-of-daily-futures-settlement/)

- [Does a Contract for Difference (CFD) Have a Holding Period for Tax Purposes?](https://learn.greeks.live/path/does-a-contract-for-difference-cfd-have-a-holding-period-for-tax-purposes/)

- [What Are the Main Tax Implications for a US Investor Holding a Futures-Based ETF versus Spot Bitcoin?](https://learn.greeks.live/path/what-are-the-main-tax-implications-for-a-us-investor-holding-a-futures-based-etf-versus-spot-bitcoin/)

## Glossar

### [Long-Term Capital Gains Tax](https://learn.greeks.live/area/long-term-capital-gains-tax/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Imputation ⎊ Long-term capital gains tax, within cryptocurrency, options, and derivatives, applies to profits realized from assets held for greater than one year, assessed against the holding period basis and adjusted cost.

### [Capital Gains Split](https://learn.greeks.live/area/capital-gains-split/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Taxation ⎊ Capital Gains Split, within cryptocurrency, options, and derivatives, denotes the apportionment of profit or loss realized from an asset sale between different tax jurisdictions or reporting entities.

### [60/40 Capital Gains Split](https://learn.greeks.live/area/60-40-capital-gains-split/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Allocation ⎊ ⎊ A 60/40 capital gains split, within cryptocurrency, options, and derivatives, typically denotes a portfolio strategy prioritizing capital appreciation over income generation, reflecting a higher risk tolerance.

### [60/40 Split](https://learn.greeks.live/area/60-40-split/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Allocation ⎊ The 60/40 Split dictates that sixty percent of the net gain or loss from a Section 1256 Contract is treated as a long-term capital gain or loss.

### [Section 1256 Contracts](https://learn.greeks.live/area/section-1256-contracts/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Taxation ⎊ Section 1256 Contracts, within the context of cryptocurrency derivatives and options, denote financial instruments specifically designated under Section 1256 of the Internal Revenue Code, resulting in a present value treatment of gains and losses as ordinary income or loss rather than capital gains or losses.

### [Gains](https://learn.greeks.live/area/gains/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)

Realization ⎊ Gains, within cryptocurrency, options, and derivatives, represent the quantified difference between the initial outlay and the subsequent value received upon the closure or liquidation of a position; this is fundamentally a measure of profit, net of associated costs, and is critical for performance attribution.

## Discover More

### [How Does a Risk Reversal Strategy Differ from a Simple Long or Short Option Position?](https://learn.greeks.live/path/how-does-a-risk-reversal-strategy-differ-from-a-simple-long-or-short-option-position/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Does a Risk Reversal Strategy Differ from a Simple Long or Short Option Position?](https://learn.greeks.live/wp-content/uploads/2025/10/Deep-Dive-Visualization-of-Interlayer-Material-Stratification-in-Volatility-Surface-Modeling.webp)

It is a synthetic forward that trades the relative volatility (skew) between a long and a short option.

### [What Are the Key Standardized Terms in a Futures Contract?](https://learn.greeks.live/path/what-are-the-key-standardized-terms-in-a-futures-contract/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![What Are the Key Standardized Terms in a Futures Contract?](https://learn.greeks.live/wp-content/uploads/2025/10/Macro-View-of-Scanner-Lamp-Assembly-Reflecting-on-Glass-Platen-for-Volatility-Surface-Mapping.webp)

Underlying asset, contract size, expiration date, and tick size.

### [Define "Logarithmic Time Complexity" in Simple Terms](https://learn.greeks.live/path/define-logarithmic-time-complexity-in-simple-terms/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Define "Logarithmic Time Complexity" in Simple Terms](https://learn.greeks.live/wp-content/uploads/2025/10/Precision-Mechanics-of-Decentralized-Finance-Asset-Volatility-Sculpting-via-Synthetic-Derivatives.webp)

The time taken to perform an operation increases very slowly as the data size grows, making it highly efficient for large blockchains.

### [Explain the Concept of 'Vega-Hedging' in Simple Terms](https://learn.greeks.live/path/explain-the-concept-of-vega-hedging-in-simple-terms/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Explain the Concept of 'Vega-Hedging' in Simple Terms](https://learn.greeks.live/wp-content/uploads/2025/10/Refraction-Dynamics-Of-Decentralized-Autonomous-Organization-Governance-Through-Crystalized-Option-Strategies.webp)

Adjusting the portfolio to be insensitive to changes in implied volatility by taking offsetting positions to balance the total Vega to zero.

### [Provide a Simple Example of a Miner Extractable Value (MEV) Opportunity](https://learn.greeks.live/path/provide-a-simple-example-of-a-miner-extractable-value-mev-opportunity/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Provide a Simple Example of a Miner Extractable Value (MEV) Opportunity](https://learn.greeks.live/wp-content/uploads/2025/10/Futuristic-Quantum-FinTech-Vehicle-Representing-Decentralized-Autonomous-Organization-Governance-Vector-Analysis.webp)

A sandwich attack: a miner front-runs a large DeFi swap with a buy and back-runs with a sell, profiting from the price movement.

### [How Do DAOs Use 'SAFTs' (Simple Agreements for Future Tokens) in Capital Raising?](https://learn.greeks.live/path/how-do-daos-use-safts-simple-agreements-for-future-tokens-in-capital-raising/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![How Do DAOs Use 'SAFTs' (Simple Agreements for Future Tokens) in Capital Raising?](https://learn.greeks.live/wp-content/uploads/2025/10/Modular-Convergence-Points-in-Decentralized-Finance-Protocol-Interoperability-Architecture.webp)

A contract where investors provide capital now for the right to receive tokens later, used to raise funds pre-launch from accredited investors.

### [Can the 60/40 Rule Ever Result in a Higher Tax Burden than Standard Long-Term Capital Gains?](https://learn.greeks.live/path/can-the-60-40-rule-ever-result-in-a-higher-tax-burden-than-standard-long-term-capital-gains/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Can the 60/40 Rule Ever Result in a Higher Tax Burden than Standard Long-Term Capital Gains?](https://learn.greeks.live/wp-content/uploads/2025/10/Specular-Refraction-Across-a-Translucent-Digital-Asset-Interface-Analyzing-Volatility-Skew-Surfaces.webp)

Yes, because 40% is taxed at the higher ordinary income rate, even for long-term positions.

### [In Crypto Options, How Does a "Volatility Surface" Differ from a Simple Volatility Skew?](https://learn.greeks.live/path/in-crypto-options-how-does-a-volatility-surface-differ-from-a-simple-volatility-skew/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![In Crypto Options, How Does a "Volatility Surface" Differ from a Simple Volatility Skew?](https://learn.greeks.live/wp-content/uploads/2025/10/Minimalist-Abstract-Rendering-of-Digital-Asset-Volatility-Surface-and-Implied-Volatility-Metrics.webp)

Skew is IV vs. Strike (2D); Surface is IV vs. Strike and Time to Expiration (3D), offering a complete view.

### [Give an Example of a Simple Invariant for a Token Contract](https://learn.greeks.live/path/give-an-example-of-a-simple-invariant-for-a-token-contract/?utm_source=crypto.greeks.live&utm_medium=referral&utm_campaign=satellite)
![Give an Example of a Simple Invariant for a Token Contract](https://learn.greeks.live/wp-content/uploads/2025/10/Articulated-Dynamic-Actuator-Assembly-Modeling-Volatility-Surface-Convexity-in-Decentralized-Finance-Instruments.webp)

The total supply of tokens must always equal the sum of all individual user balances.

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**Original URL:** https://learn.greeks.live/learn/explain-the-60-40-capital-gains-split-in-simple-terms/
