Form 6781
The IRS form used to report gains and losses from Section 1256 contracts and straddles. It applies the 60/40 split and flows the result to Schedule D.
If you take the position that your Kalshi contracts are Section 1256, Form 6781 is where the 60/40 split actually happens on the return before flowing to Schedule D. Because the stance is aggressive for event contracts, preparers sometimes pair it with a Form 8275 disclosure.
Form 6781, Gains and Losses From Section 1256 Contracts and Straddles, is the IRS form where the 60/40 split is actually applied. If you take the position that your event-contract gains are Section 1256, you report the net on Form 6781, which divides it into 60 percent long-term and 40 percent short-term and carries the result to Schedule D.
The form is short. Part I handles Section 1256 contracts: you enter your net gain or loss, and the form computes the 60/40 division on a single line. There is no per-trade detail to enter, because the treatment works on your annual net rather than on individual trades, which is one reason 1256 reporting is simpler than line-by-line capital-gains reporting on Form 8949.
Because claiming Section 1256 on event contracts is an aggressive position while the law is unsettled, some preparers pair Form 6781 with a Form 8275 disclosure statement, which discloses the position taken. That is a judgment call for your tax professional based on your facts and risk tolerance.
If your net Kalshi result for the year is a $20,000 gain and you treat it as Section 1256, Form 6781 puts $12,000 in the long-term column and $8,000 in the short-term column, then flows the combined figure to Schedule D where it joins your other capital gains and losses.
Frequently asked questions
What is Form 6781 used for?
It reports gains and losses from Section 1256 contracts and applies the 60/40 split before carrying the result to Schedule D. It is the form where the favorable tax treatment is actually computed.
Do I list every trade on Form 6781?
No. Section 1256 treatment works on your net for the year, so you enter a single net figure rather than itemizing each trade. That makes it simpler than line-by-line Form 8949 reporting.
Should I file a disclosure with Form 6781 for Kalshi?
Some preparers attach a Form 8275 disclosure because applying Section 1256 to event contracts is an unsettled, aggressive position. Whether to disclose is a decision for your tax professional.