Other Financial Products

Volatility ETNs, foreign futures, and precious metals.

Foreign futures

By default, futures contracts on international exchanges are not covered by Section 1256. If the international exchange wants Section 1256 tax treatment, it must obtain an IRS Revenue Ruling.

International futures exchanges that have Section 1256 treatment: ICE Futures Canada, Dubai Mercantile Exchange, ICE Futures Europe, ICE Futures UK, Eurex Deutschland, European Energy Exchange (EEE), and Bourse de Montréal (MX),

Without Section 1256 treatment, foreign futures are otherwise ST or LT capital gains. In contrast, major foreign exchanges such as the London Metal Exchange (LME), Osaka Exchange (JPX), Hong Kong Exchange (HKEX), and Singapore Exchange (SGX) do not currently hold IRS Section 1256 QBE rulings.

Precious metals

Physical precious metals are a particular class of capital assets called collectibles. If you hold collectibles for 12 months before the sale, you must use the capital gains tax rate applicable to collectibles, capped at 28%. (If the ordinary rate is lower, use it.) The short-term capital gains rate applies if you hold collectibles for 12 months or less. Precious metals are not securities, so wash-sale loss adjustments and Section 475 do not apply.

If you would like more information, you can see Green’sTraderTax Guide Chapter 3, Tax Treatment of Financial Products.