How to Fill Out Form 6781 for Event Contracts

What is Form 6781, and when do event contracts go on it?

Form 6781 is titled Gains and Losses From Section 1256 Contracts and Straddles. It is one form per return, not one per venue, and it has three parts. Part I, Section 1256 Contracts Marked to Market, is where an event-contract trader's year goes, and it is what this guide walks through.

Event contracts belong there if you treat them as Section 1256 contracts. That is the open question. Kalshi and Polymarket US are CFTC-designated exchanges, which is part of the argument for it, but neither the IRS nor any court has said these contracts qualify. The argument both ways is in our Section 1256 60/40 guide. This page assumes you and your tax professional have already landed there, and shows what the form looks like when you have.

The other two parts are rarely yours. Part II is for straddles, offsetting positions held so one cushions the other. Part III is a memo entry listing positions held at year end that were worth more than their cost, and the form asks for it in a year you recognized a loss on some position. A position marked to market under Part I has no unrecognized gain left in it.

How do you fill out Form 6781 Part I, line by line?

Here is one year, illustrative and kept small so the arithmetic stays visible. Fees are left out to keep the rows readable; on a real return they come off each closed position's result.

And here is Part I, filled in from it:

Line 1: where your contracts go

Line 1 takes every Section 1256 contract that was open at the end of your tax year or closed during it. That is two kinds of position: the ones you closed, at proceeds less cost, and the ones you still held on December 31, at that day's value less cost.

A broker that reports Section 1256 contracts sends a Form 1099-B with an aggregate figure in box 11, and you copy it across. No venue sends one for event contracts, so this line is one you build.

Column (a) is captioned Identification of account. In the example each account gets one row, with its losing positions totalled in column (b) and its winning positions totalled in column (c), and every position listed on a transaction statement attached to the form. The form's instructions also ask you to list separately each transaction that no Form 1099-B covers. That is what the attached statement does. Some tax professionals prefer the positions on line 1 itself, so ask which layout yours wants.

Losses and gains stay in separate columns. Kalshi shows $825 of losses and $1,470 of gains, not a net $645, because the form asks for both.

Lines 2 to 5: subtotal, net, and the line you leave blank

Line 2 adds each column, and line 3 nets them: $2,220 of gains less $1,525 of losses is a $695 net gain.

Line 4 catches people out because it is captioned Form 1099-B adjustments. The instructions reserve it for straddle and hedging adjustments to a 1099-B you received. A missing 1099-B is not an adjustment, so the line stays blank and line 5 equals line 3.

Lines 7 to 9: the split, and where it goes

On a gain year the form says to skip line 6 and carry the gain to line 7. Line 8 is 40% of line 7, $278, and goes to Schedule D line 4 as short-term. Line 9 is 60% of line 7, $417, and goes to Schedule D line 11 as long-term.

Two rules sit behind those two numbers. The split is taken once, from the net, never trade by trade. And it ignores how long anything was held, under §1256(a)(3): the position resolved in an afternoon and the one carried across the year end get the same 40/60 character. When the split does not divide evenly, round the 40% piece and take the 60% piece as the remainder, so the two add back to line 7 with no stray cent.

What goes on line 1 for a position still open on December 31?

Its value that day, less its cost. §1256(a)(1) treats a Section 1256 contract held at the close of the tax year as sold at fair market value on the last business day of the year. Nothing was sold and nothing was received, but the gain or loss to that point lands on this year's return.

In the example, the open Kalshi position cost $350 and closed the year at $0.62, or $620. That $270 is in Kalshi's column (c), even though the market has not resolved. Under §1256(a)(2) the gain you later realize is adjusted for what was already counted, so next year that position starts from $620. Price it from the original $350 next year and the $270 is taxed twice.

The open Polymarket US position is missing from line 1 on purpose. That market had no price on record for the last day of the year, so there is no fair market value to mark it at. Marking it at cost, or at a stale trade, would put an invented number on a signed return. Leave it off, and name it to your tax professional so the gap is visible. Its result is recognized in the year it resolves or you sell it.

One wrinkle: the statute says last business day, and these venues quote through weekends and holidays. When December 31 falls on a weekend, which day counts is worth a question to your tax professional. Where Kalshi's daily closing prices come from, and the traps in reading them, are in how to file Kalshi taxes.

Can Kalshi and Polymarket go on the same Form 6781?

Yes. Form 6781 is per return, so every account you file under Section 1256 goes on the same Part I. Each keeps its own row on line 1, and they meet at line 3, where a loss at one venue nets against a gain at the other before anything is split.

The exchange matters. The Section 1256 categories event contracts are argued under turn on trading on a qualified board or exchange, which under §1256(g)(7)(B) includes a CFTC-designated contract market. Kalshi and Polymarket US are on the CFTC's list of designated contract markets. Polymarket's international venue is not, so the argument for Section 1256 never starts for trades there, and they do not belong on this form under it.

Futures and listed broad-based index options are Section 1256 contracts too, and they share this form if you hold them. How their 1099-B row sits beside an event-contract row is covered in how to file Kalshi taxes.

What does Form 6781 look like in a losing year?

The same lines, with the signs flipped. Say line 3 nets to a $40,000 loss, and you had no Section 1256 gains in the three years before.

On a loss year line 6 is not skipped. The form says to enter -0- when box D is not checked. Lines 8 and 9 then carry the loss to Schedule D as $16,000 short-term and $24,000 long-term.

What happens next is not on this form. Schedule D nets those pieces against any other capital gains on your return, and a remaining net capital loss comes off ordinary income at up to $3,000 a year, $1,500 if married filing separately, under §1211(b). The rest carries forward under §1212(b). With nothing else on Schedule D, that is $3,000 this year and $37,000 carried forward, and under §1212(c)(6)(B) the part that came from Section 1256 contracts is still treated as a Section 1256 loss in the years it reaches.

How does the box D net Section 1256 contracts loss election work?

Box D lets a net Section 1256 loss travel back as well as forward. Under §1212(c) you can elect to carry it back to each of the three preceding tax years, against net Section 1256 gains in those years.

Take the same $40,000 loss, but now you had a $25,000 net Section 1256 gain two years earlier and nothing in the other two years. You check box D and enter the amount carried back on line 6:

Line 6 is entered as a positive number, so it shrinks the loss that stays on this year's return. Lines 8 and 9 split what is left. With nothing else on Schedule D, $3,000 of that $15,000 comes off ordinary income this year and $12,000 carries forward.

The limits are printed on the form, and they decide whether the election is worth anything:

• The loss you can carry back is the smaller of two figures. One is the amount by which your Section 1256 losses exceed your Section 1256 gains plus $3,000, or $1,500 if married filing separately. The other is the capital loss carryover you would have without the carryback. Other capital gains on your return can shrink it.
• Each earlier year can absorb no more than its own net Section 1256 gain, and no more than its total capital gain. The carryback cannot create or increase a net operating loss in that year.
• The loss goes to the earliest year first, and whatever that year cannot absorb moves to the next.

With no Section 1256 gain in any of the three years, the election reaches nothing. That is the common case for a trader whose Section 1256 activity has always been event contracts, and the losing year in the previous section is that case.

To claim it, file Form 1045 or an amended return for each year reached, with an amended Form 6781 and Schedule D. On the earlier year's amended Form 6781, the carryback goes on line 1 with "Net section 1256 contracts loss carried back from" and the loss year in column (a), and the amount in column (b). What that recovers depends on each earlier year's whole return, so we put no dollar figure on it here. The mechanics of amending are in how to amend a tax return for Kalshi losses.

Do event contracts have to go on Form 6781?

No. Form 6781 is the form for one treatment. Each characterization has its own form, and a given contract goes on one of them:

Note: the Section 1256 row assumes event contracts qualify as Section 1256 contracts, which no IRS guidance or court ruling has addressed. It shows where they go if they do.

The treatment is a judgment about what the contracts are, made once with your tax professional and held across good years and bad. It is not a choice to remake each April. How the capital route reports the same trades is in standard capital treatment.

How Realize helps

Realize reads your trade history from Kalshi and Polymarket US, rebuilds each position, prices every position open on December 31 from the venue's own price history for that day, and builds Form 6781 Part I with the transaction statement behind it. It also builds Form 8949 for the capital route. The forms open in production for the 2026 filing season. How we check the figures is in how Realize checks its numbers.

Realize does not produce Schedule D, the capital loss carryover worksheet, Form 1045 or a 1040-X, and it does not choose your treatment. Those stay with you and your tax professional. For the wider picture, start at the Prediction Market Tax Center.

The bottom line

On Form 6781, line 1 is the work: every closed position and every position still open on December 31, at that day's price, with anything unpriced left off and named. Lines 2 through 9 are arithmetic, and the 40/60 split always comes from line 7. In a losing year, box D does nothing unless you had a Section 1256 gain in the three years before. Whether event contracts belong on this form at all is unsettled, so settle the treatment with a tax professional before you fill it in.

Status as of October 7, 2026, against the 2025 revision of Form 6781.

Questions people ask

What goes on line 1 of Form 6781 for Kalshi trades?

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Every contract you closed during the year, at proceeds less cost, plus every contract still open on December 31, at that day's price less cost. Losses go in column (b) and gains in column (c), and they stay apart until line 3. No venue sends a Form 1099-B with a box 11 figure for event contracts, so the line is one you build. The form asks you to list separately each transaction no 1099-B covers. Realize uses one row per account with every position listed on an attached statement; ask your tax professional which layout they want. All of this applies if you file the contracts under Section 1256, which is unsettled for event contracts.

Do Form 6781 lines 8 and 9 use line 3 or line 7?

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Line 7. Line 8 is 40% of line 7 and goes to Schedule D line 4 as short-term; line 9 is 60% of line 7 and goes to Schedule D line 11 as long-term. Line 7 equals line 3 when line 4 is blank and there is no carryback on line 6, which is why the two are easy to confuse. In a losing year with the box D election, they differ.

What if a market had no price on December 31?

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Then there is no fair market value to mark it at, and the honest treatment is to leave that position off Form 6781 rather than mark it at what you paid or at a stale trade. Name it to your tax professional so the gap is visible. When the market later resolves or you sell, the result is recognized in that year.

What is the net section 1256 contracts loss election?

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It is box D on Form 6781. If you have a net Section 1256 loss, you can elect to carry it back to the three preceding tax years, earliest first, against net Section 1256 gains in those years. You check box D, enter the amount carried back on line 6, and file Form 1045 or an amended return for each year it reaches. It does nothing unless you had a Section 1256 gain in one of those years. Whether event contracts are Section 1256 contracts at all is unsettled.

Do I need Form 8949 as well as Form 6781?

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Not for contracts you file under Section 1256. Form 6781 lines 8 and 9 go straight to Schedule D. Form 8949 is where the same contracts would go if you filed them as ordinary capital assets instead. A given contract goes on one or the other, not both.