Prediction market tax terms, one line each.

The form a broker sends for sales of securities and futures, with an aggregate box for Section 1256 contracts. No venue we checked describes a 1099-B that reports event contract profit or loss.

The form a broker sends for digital asset sales: proceeds from 2025, basis from 2026. Its instructions never name event contracts, and no venue we checked describes its 1099-DA as reporting contract results.

A form for other income, such as credits, rewards or prizes, sent above an IRS threshold. Kalshi lists one for credits and rewards. Novig describes its 1099-MISC as net redemptions, not profit.

Under §1256(a)(3), gain or loss on a Section 1256 contract counts as 60% long-term and 40% short-term, however long it was held. Form 6781 makes the split.

The part of a net capital loss above the yearly limit. Under §1212(b) it moves to later years with no end date and keeps its short-term or long-term character.

Under §1211(b), a net capital loss offsets capital gains, then up to $3,000 of other income a year ($1,500 married filing separately). The rest carries forward.

Under §1212(c), a net Section 1256 loss can be carried back three years against earlier Section 1256 gains. It is elected on Form 6781 box D and claimed on Form 1045 or amended returns.

The Commodity Futures Trading Commission, the federal regulator of futures, swaps and event contracts. It registers exchanges such as Kalshi and Polymarket US as designated contract markets.

What a position cost, usually with the opening fee added. Gain or loss is proceeds minus cost basis. Under Section 1256, a position carried into a new year starts from the year-end price.

The sale Section 1256 treats as happening on the last business day of the year for a contract still held, at fair market value. The position then restarts at that price.

An exchange the CFTC has registered to list futures and event contracts. Kalshi and Polymarket US are DCMs. People filing under Section 1256 read that status as meeting its exchange test.

A contract that pays a fixed amount, usually $1.00, if an event happens and nothing if it does not. There is no IRS guidance on how event contracts are taxed.

First in, first out: a sale is matched against the earliest-bought contracts of the same position first. Kalshi says its profit and loss figures use FIFO.

The amended individual return. It corrects a year already filed, such as one that left out prediction market trades or reported them a different way.

The application for a tentative refund. One way to claim a Section 1256 loss carryback, covering every year reached on one form. The other way is a Form 1040-X for each year.

Gains and Losses From Section 1256 Contracts and Straddles. Part I takes closed contracts plus those held at year end, then sends 40% of the net to Schedule D as short-term and 60% as long-term.

The disclosure statement attached to a return to explain a position. With a reasonable basis, disclosing a position can keep it out of parts of the accuracy-related penalty.

Sales and Other Dispositions of Capital Assets: one row per closed position. With no 1099-B, short-term rows use box C and long-term rows box F, totaled on Schedule D.

Under gambling treatment, the total of winning results, reported on Schedule 1 line 8b as ordinary income. A losing session does not reduce that line.

How long a position was held. More than one year is long-term, one year or less short-term. Under Section 1256 it does not change the 60/40 split.

Deductions listed on Schedule A in place of the standard deduction. Under gambling treatment, losses come off only for people who itemize.

A gain on a position held more than one year, taxed at long-term rates. Under Section 1256, 60% of the net counts as long-term whatever the holding period.

Valuing a position at its market price on a set day and counting the gain or loss as if it were sold. Section 1256 marks contracts still held at the end of the tax year.

An option not on stock or a narrow stock index, such as a listed broad-based index option. It is a Section 1256 contract. Whether a binary event contract is an option is undecided.

Income taxed at regular bracket rates, such as wages, interest and gambling winnings. Short-term capital gains are taxed at the same rates, and most event contract gains filed as standard capital are short-term.

What a position paid when it closed: contracts times the exit price, or $1.00 or $0.00 a contract at settlement. The common convention takes the closing fee out.

Under §1256(g)(7), a national securities exchange, a CFTC designated contract market, or an exchange Treasury names. A regulated futures contract must trade on one.

The result of a position that has closed. Venue profit and loss figures, such as Kalshi’s, cover realized results only, so they leave out positions still open on December 31.

A standard of tax reporting the Form 8275 instructions call “a relatively high standard.” A disclosed position with a reasonable basis can stay out of parts of the accuracy-related penalty.

Under §1256(g)(1), a contract marked to market daily under its exchange’s margin system and traded on a qualified board or exchange. The first kind of Section 1256 contract.

Additional Income and Adjustments to Income. Line 8b takes gambling winnings for people filing event contracts as gambling.

Itemized Deductions. Line 16 takes gambling losses, only up to winnings, and at 90% of the loss for tax years beginning after December 31, 2025.

Capital Gains and Losses. It totals Form 8949, takes Form 6781’s short-term and long-term figures on lines 4 and 11, and applies the capital loss limit.

One of five kinds of contract in §1256(b)(1), such as regulated futures contracts and nonequity options, marked to market at year end and split 60/40. Whether event contracts qualify is unsettled.

Under gambling treatment, the unit in which wins and losses are counted. No IRS guidance says how results group on an exchange. Realize nets each market’s positions closed on one Eastern day.

When a market resolves and each contract pays $1.00 or $0.00. Settlement closes the position like a sale at the payout. On Kalshi, settling carries no fee.

A gain on a position held one year or less, taxed at ordinary income rates. Most event contracts resolve within weeks, so under standard capital almost every row is short-term.

Filing event contracts as capital assets: each closed position on Form 8949, totaled on Schedule D, short-term or long-term by holding period. A position open on December 31 waits until it closes.

Offsetting positions where one leg’s loss is cushioned by another’s gain. Form 6781 Parts II and III cover straddles, and most event contract filers leave them empty.

The rule at §1256(b)(2)(B) that keeps swaps and similar agreements out of Section 1256. It is the provision most often cited against filing event contracts under Section 1256.

Under §165(d), gambling losses are deductible only up to gambling winnings and only by people who itemize. For tax years beginning after December 31, 2025, the deduction is 90% of the losses.

Under §1091, a loss on stock or securities is disallowed when substantially identical ones are bought within 30 days before or after. No IRS guidance says whether an event contract is either.