How Is the Tax on a Section 1256 Option Calculated If It Expires Worthless?

If a Section 1256 option expires worthless, the loss recognized is still subject to the 60/40 rule. The premium paid for the option is treated as a loss, and 60% of that loss is long-term capital loss, while 40% is short-term capital loss.

This is one of the advantages of Section 1256, as a loss is treated as 60% long-term even if the option was held for only a short period.