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what tax law loophole is buffet referring to?
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a section 1256 contract is any: non-equity options include debt options, commodity futures options, currency options, and broad-based stock index options. a broad-based stock index is based upon the value of a group of diversified stocks or securities (such as the standard and poor's 500 index). 60% of the capital gain or loss from section 1256 contracts is deemed to be long-term capital gain or loss and 40% is deemed to be short-term capital gain or loss. what this means is a more favorable tax treatment of 60% of your gains. http://www.tradelogsoftware.com/tax-topics/futures/ it's a really wierd rule (arbitraty 60% designation, so broad, etc), but section 1256 contracts get preferential tax treatment and that's what buffett's talking about.
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