Explain the 60/40 Rule in Detail

The 60/40 rule is a tax provision for Section 1256 contracts where 60% of the net gain or loss is treated as long-term capital gain or loss, and the remaining 40% is treated as short-term capital gain or loss. This blend is often advantageous because the long-term portion is taxed at a lower rate than the short-term portion, which is taxed at ordinary income rates.

It applies regardless of how long the contract was held.