Form 8275 disclosure statement for Section 1256 event contracts

Disclosure changes the test for two parts of the penalty: substantial understatement and disregard of rules. Under §6662, the accuracy-related penalty is 20% of the part of an underpayment it applies to. For most individuals, an understatement is substantial when it is more than the greater of two amounts: 10% of the tax that should have been shown, or $5,000. For filers claiming the §199A deduction, 5% replaces 10%.

Form 8275 and the two tests: substantial authority and reasonable basis

The law leaves two kinds of item out of a substantial understatement. An item with substantial authority is left out with no disclosure at all. An item with a reasonable basis is left out only when its facts are adequately disclosed. Each part of the penalty, and the preparer’s standard, treats disclosure this way:

The instructions call reasonable basis “a relatively high standard of tax reporting.” A position that is merely arguable does not meet it, under §1.6662-3(b)(3). Disclosure of a position with no reasonable basis has no effect.

What Form 8275 does not reach

The instructions list the parts of the penalty that Form 8275 cannot avoid. They start with three:

• Negligence: disclosure never reaches it.
• Disregard of regulations: that takes Form 8275-R and a good faith challenge to the regulation. Disregard of other rules is within Form 8275’s reach.
• A tax shelter item: an understatement on one stays in.

Disclosure also fails without proper books and records. Reasonable cause and good faith is a separate exception to the penalty, with no form attached.

There is no IRS guidance on whether event contracts are Section 1256 contracts. §1256(b) defines a Section 1256 contract by five types:

• regulated futures
• foreign currency contracts
• nonequity options
• dealer equity options
• dealer securities futures

Event contracts are not named.

For people who want to file under Section 1256 because of the 60/40 split, Form 8275 is the form a return uses to describe that treatment. Some people who file under Section 1256 attach one, according to practitioner write-ups from Coselite, a tax preparation firm, and NATP.

The swap exclusion in §1256(b)(2)(B) and Form 8275

The swap exclusion in §1256(b)(2)(B) is the provision most often cited against treating event contracts as Section 1256 contracts. It keeps swaps and “similar agreements” out of Section 1256. Section 1256(g)(7) counts a contract market designated by the CFTC as a qualified exchange.

What Form 8275 does not decide

Form 8275 discloses facts. It does not settle whether event contracts are Section 1256 contracts. It does not create a reasonable basis either. Whether event contracts have a reasonable basis is an open question.

Form 8275 Part I: the items

Each row of Part I is one item, or one group of similar items. The instructions say what goes in each column:

• Column (a), “Rev. Rul., Rev. Proc., etc.”: the authority. The instructions say a position contrary to a rule, such as a statutory provision or a revenue ruling, must name that rule here.
• Column (b): the item, by name.
• Column (c): a complete description of the item, or of the group.
• Column (d): the form or schedule that reports the item.
• Column (e): the line on that form.
• Column (f): the amount.

For a Section 1256 item, the form in column (d) is Form 6781. Column (e) is the Form 6781 line that carries the item.

Form 8275 Part II: the facts

Part II describes the relevant facts. The instructions say they must let the IRS see the item, its amount and the nature of the controversy. That can include the legal issues the facts raise.

The statement has to be on the form itself: a completed Form 8275 attached to the return. A disclosure made only in a letter or on another form is not valid.

Form 8275 goes with the original return, or with a qualified amended return, under §1.6662-4(f)(1). The instructions add one step: keep a copy.

Form 8275 is filed one year at a time

A recurring item is disclosed for each year it is taken into account. A disclosure on one year’s return does not carry to the next.

Form 8275 and a loss carried back or forward

An item inside a loss carried to another year is disclosed once, with the return for the year the loss arose. It is not disclosed again in the year the loss is used. A Section 1256 loss claimed on Form 1045 follows that rule.

Items disclosed without Form 8275

An annual revenue procedure lists items that count as disclosed on the return itself, with no Form 8275. The current one, Rev. Proc. 2026-12 for 2025 returns, lists no Form 6781 or Schedule D item.

Can Form 8275 be e-filed?

Yes, with an e-filed 2025 Form 1040. The IRS lists Form 8275 among the forms accepted with it.

For a Section 1256 year, Form 8275 sits beside the chain and names the Form 6781 line it describes. No venue form feeds Form 8275. The chain starts with the trades, then Form 6781, then Schedule D, then the return. A carried-back loss adds Form 1045.

Realize builds Form 6781 and the year’s Section 1256 figures for the venues you connect. It does not produce Form 8275 or its Part II text. It puts no figure on any penalty. The line-by-line Form 6781 is in the Form 6781 guide for event contracts.