His One-Ounce Gold Trade Was Still Open. The IRS Treated It as Sold Anyway.

A retiree in his early seventies buys a one-ounce gold futures contract because he is uneasy about the dollar. He keeps it open through Dec. 31, expecting to choose when to sell. If it is a qualifying regulated futures contract under Section 1256 of the Internal Revenue Code, the IRS chooses the tax date instead. Such contracts are marked to market on the last business day of the tax year. The holder recognizes the difference between the contract’s tax basis and fair market value without closing the trade. That amount is considered again when the contract is eventually disposed of, preventing the same gain from being taxed twice. The gain receives 60/40 treatment: 60% is long-term capital gain and 40% is short-term capital gain, regardless of whether the contract was held for six months, six weeks or six days. Losses are recognized as well. The treatment can benefit short-term traders but eliminates the ability to defer a profitable qualifying position by leaving it open. CME Group offers a one-ounce gold futures contract, although Section 1256 does not automatically apply to every form of gold ownership. The gain does not trigger Social Security retirement earnings-test withholding. It can, however, increase the portion of benefits subject to income tax. The calculation generally combines one-half of Social Security benefits with other income, including tax-exempt interest. Benefits can begin becoming taxable above $25,000 for single filers and $32,000 for married couples filing jointly. At higher income levels, up to 85% of benefits can be included in taxable income. Medicare may feel the effect later. Social Security generally uses tax data from two years earlier to calculate IRMAA, which can raise Part B and prescription-drug premiums. In 2026, standard Part B costs $202.90 monthly. IRMAA begins above modified adjusted gross income of $109,000 for individuals or $218,000 for joint filers; the first tier adds $81.20 monthly to Part B. A 2026 gain would ordinarily affect a later determination, when thresholds and premiums may differ. A profitable futures trade is not a listed life-changing event for requesting lower IRMAA. Investors should confirm Section 1256 treatment, calculate the gain alongside Social Security income and check proximity to Medicare thresholds before year-end.