How Is a Physically-Settled Commodity Future Taxed If It Is a Section 1256 Contract?
A physically-settled commodity future that is a Section 1256 contract is still subject to the 60/40 rule and mark-to-market. However, if the contract is held until delivery, special rules apply.
The delivery is not a taxable event, but the basis of the commodity received is adjusted by the mark-to-market gain/loss. The subsequent sale of the commodity is a taxable event.
Glossar
Section 1256
Standardization ⎊ This specific tax code provision mandates special treatment for certain regulated futures contracts, which can apply to crypto derivatives traded on designated exchanges under specific conditions.
Section 1256 Contract
Definition ⎊ This classification identifies specific exchange-traded futures and certain non-equity options that are subject to special tax accounting rules under the relevant tax code section.