How Does the “Mark-to-Market” Rule Affect the Taxation of Futures?
The Mark-to-Market (MTM) rule, under US tax law (Section 1256), requires traders to treat certain regulated futures contracts as if they were sold at fair market value on the last day of the tax year, regardless of whether they were actually closed. Gains and losses are typically treated as 60% long-term and 40% short-term capital gains, offering a favorable tax treatment.
Glossar
Fair Market Value
Benchmark ⎊ This value represents the consensus price at which an asset or derivative contract would trade between two informed, willing, and uncoerced counterparties in an efficient market.
Regulated Futures Contracts
Contract ⎊ Regulated futures contracts, particularly within the evolving landscape of cryptocurrency derivatives, represent standardized agreements obligating one party to buy or sell an asset at a predetermined price and date.
Taxation
Imposition ⎊ Taxation within cryptocurrency, options, and derivatives necessitates a nuanced understanding of jurisdictional frameworks and evolving regulatory interpretations.