IRS Tax Rules Treat Open Gold Futures Contracts as Sold at Year-End
The IRS treats open regulated futures contracts, including one-ounce gold futures under Section 1256 of the Internal Revenue Code, as sold on the last business day of the tax year. This means investors must recognize gains or losses even if they do not close their positions before December 31. For retirees receiving Social Security benefits, this can increase taxable income and potentially push more of those benefits into a higher tax bracket—up to 85% in some cases. Additionally, the gain may affect Medicare premiums two years later by triggering Income-Related Monthly Adjustment Amounts (IRMAA), which could add at least $81 per month for Part B. The IRS applies a 60/40 rule where 60% of gains are treated as long-term capital gains and 40% as short-term, regardless of the holding period. This can have significant implications on tax liability and future benefits.
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Topics: futures contracts gold trading IRS Medicare IRMAA Section 1256 Social Security taxation