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The Tax Thread
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Created: by Big Mike Attachments:3

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The Tax Thread

  #111 (permalink)
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Just found out:

Designation of Eurex Deutschland as a “Qualified Board or Exchange” for purposes of Section 1256(g)(7) of the United States Internal Revenue Code

On 7 February 2013, Eurex Deutschland announced that the U.S. Internal Revenue Service (“IRS”)has designated Eurex Deutschland as a “Qualified Board or Exchange” for purposes of Section 1256(g)(7)of the U.S. Internal Revenue Code. This ruling, effective for all contracts entered on or after 1 March 2013, means that U.S. persons that trade at Eurex Deutschland may receive “60/40 tax treatment” in the same way when trading at other U.S. futures exchanges.

https://www.eurexchange.com/exchange-en/resources/circulars/398662/
Internal Revenue Bulletin - February 25, 2013 - Rev. Rul. 2013-5

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  #112 (permalink)
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Retirement Accounts

Here is a heads up for your Retirement Accounts in 2014, this is IRA and 401K Accounts.
I am going to post this because it is looking like Our Retirement Accounts may be in Jeapardy, Similar to what has happened to our Social Security Fund.
This is my Speculative view.
OBAMA’S NEW BUDGET WILL DESTROY YOUR IRA’S AND 401K ACCOUNTS…
Uncle Sam Wants Your IRA's | Banking-Holiday

Anyway i like the Futures Tax Liability at 60/40 which like others have mentioned 60 % of Profits taxed at 15 %, and 40 % of your Trading Profits at your regular rate.
2013 Rate Brackets: 2013 tax bracket rates
By Kay Bell • Bankrate.com

Taxes » Tax Brackets » 2013 Tax Bracket Rates

With the enactment Jan. 2, 2013, of the American Taxpayer Relief Act of 2012, the six income tax brackets that were created more than a decade ago and which had been scheduled to expire at the end of 2012 were made permanent. In addition, a new top tax rate was added. For the 2013 tax year (returns due April 15, 2014), the seven individual income tax rates and the earnings to which they apply are shown in the table below.

2013 tax rates table link:
2013 Tax Bracket Rates | Bankrate.com

So you have 60% of Trading Profits Taxed at a 15% rate and the remaining 40% taxed at your Rate in the table for a combined average from the two rates is your Total Tax liability if you Trade Futures Contracts like Gold and Crude and other Futures, even SPX.
Do your research on what gets the 60/40 Rate, and as some have mentioned 1099 is single Line input and Every Trade does not have to be listed, just Total Profit above what you started with.
POTENTIAL TAX ADVANTAGE WITH FUTURES - Blended Tax Rates and Capital Gains -

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  #113 (permalink)
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Big Mike View Post
I looked into Hong Kong corporations but it seems no longer possible as a US citizen. The US has squashed all tax havens...

Mike

So to your knowledge the Singapore option is off the table because US law is quashing it?

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  #114 (permalink)
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sysot1t View Post
On the presentation, just take a look at slide 7, and 41-44... those are the main benefits, the rest are all manuvering to minimize the tax liability...

I only disagree with one thing that most people say that shouldnt be done. A beginner would benefit greatly from having a SMLLC-SCorp setup from the start. The cost to setup a proper LLC will run you about $500-600 from a number of different sites, it is always wise to get the LLC done on your own state.

As long as you are going to capitalize it properly, and by that I mean around $20-30K (ideally $50K), the costs to operate the LLC are minimal and you will get from the start the ability to deduct everything you need to... even better, with your own business you can also move the IRA's into a soloK account and then do other things with that money that you could not otherwise do...

that is just my opinion and my own preference.. of course, the above doesnt work right if you are doing it with $5K.. as it would represent a big portion of your trading funds, but again with $5K one should be trading forex and microlots to learn to trade in reality, and should stay away from futures... a lot better to learn to trade risking $2-3.00 per day or even trade, than risking $50-100 and blowing up on no time.

again, just my opinion.


Incfile does it for about $150 - never seen a $500 rate to incorporate.

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  #115 (permalink)
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more info


josh View Post
Also just having done this a week ago, I would like to wholeheartedly recommend a free service:

I was linked there from the IRS page, and it's federal only, not state. I strongly dislike the interview-based software, where you are asked a series of questions. I much prefer to look at the form that will actually be filed. It takes a little more research sometimes to figure out what to do, but IMO the transparency of the process and having the confidence of seeing the actual forms and knowing what your financial situation actually is makes it worthwhile. The interview will ask you ten million questions, most of which do not apply to you, and it may still not cover all bases or get the forms filled out right for your individual scenario.

This does some auto calculations, and is the best software I have used because it's just the form, and it's clean, efficient, and you see what forms you're using to file with instead of the wizard of Oz behind the curtain.

To expand on what Mike said, the 6781 form info goes onto Schedule D, where you will calculate your 60/40 split, and then this information, gain or loss, then goes onto the 1040.

I had a profitable year I did the 6781 which, had me put my short term capital gains(40%) on Schedule D line 4 and long term capital gains(60%) on Schedule D line 11.
to complete Schedule D and all my profits are from trading Future contracts (ES,YM) line 7 you put same as line 4 and line 15 you put same as line 11. Then line 16 'Combine lines 7 and 15 and enter the result' which means you add the short and long term capital gains you spit up on form 6781 back together.
then line 16 states "If line 16 is a gain, enter the amount from line 16 on Form 1040, line 13," and my doing this you end up getting taxed on all of it as regular income and you don't get the 60% long term capital gains tax.
Then you go line 17 =yes, line 18=0, line 19=0, line 20 =yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 (or in the instructions for Form 1040NR, line 42). Do not complete lines
21 and 22 below.
So I go to the Qualified Dividends and Capital Gain Tax Worksheet I did it 3 times and each time by IRS math. It flips the numbers and has me calculate my 15% tax on my short term capital gains (40% of futures contracts not the 60%) using craze math. then once you have that # you go and look at Tax table and enter it on line 44.
The outcome is you pay regular income taxes on 100% and on your short term you pay an extra 15% so this tax advance sucks.
I called the IRS waited one hour and once I say what I was doing and used the name '1256 contracts' They said they can not help me and I needed to look on there website.

Here is my question has anyone REALLY know how to enter the 60/40 on the 1040 ?

Even if you had your accountant do it its not that hard to pull your 1040 (last years) out and see if he did what I did and you are over paying or if he did it right and what does the Schedule D look like.
I think the IRS does not want to help me because 90 percent of day-trader over pay their taxes.
The way I see doing it is leave part 3 of Schedule D blank. on my 1040 line 13 put my short term capital gains (40%)amount which it will get taxed at regular income Then going into the 'tax table' figure out the long term capital gains(60%) and put that amount on line 44 on form 1040.
Anyone who has had a profit trading 1256 contracts I would love to hear from you Thanks LD

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  #116 (permalink)
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lawdam View Post
I had a profitable year I did the 6781 which, had me put my short term capital gains(40%) on Schedule D line 4 and long term capital gains(60%) on Schedule D line 11.
to complete Schedule D and all my profits are from trading Future contracts (ES,YM) line 7 you put same as line 4 and line 15 you put same as line 11. Then line 16 'Combine lines 7 and 15 and enter the result' which means you add the short and long term capital gains you spit up on form 6781 back together.
then line 16 states "If line 16 is a gain, enter the amount from line 16 on Form 1040, line 13," and my doing this you end up getting taxed on all of it as regular income and you don't get the 60% long term capital gains tax.
Then you go line 17 =yes, line 18=0, line 19=0, line 20 =yes. Complete the Qualified Dividends and Capital Gain Tax Worksheet in the instructions for Form 1040, line 44 (or in the instructions for Form 1040NR, line 42). Do not complete lines
21 and 22 below.
So I go to the Qualified Dividends and Capital Gain Tax Worksheet I did it 3 times and each time by IRS math. It flips the numbers and has me calculate my 15% tax on my short term capital gains (40% of futures contracts not the 60%) using craze math. then once you have that # you go and look at Tax table and enter it on line 44.
The outcome is you pay regular income taxes on 100% and on your short term you pay an extra 15% so this tax advance sucks.
I called the IRS waited one hour and once I say what I was doing and used the name '1256 contracts' They said they can not help me and I needed to look on there website.

Here is my question has anyone REALLY know how to enter the 60/40 on the 1040 ?

Even if you had your accountant do it its not that hard to pull your 1040 (last years) out and see if he did what I did and you are over paying or if he did it right and what does the Schedule D look like.
I think the IRS does not want to help me because 90 percent of day-trader over pay their taxes.
The way I see doing it is leave part 3 of Schedule D blank. on my 1040 line 13 put my short term capital gains (40%)amount which it will get taxed at regular income Then going into the 'tax table' figure out the long term capital gains(60%) and put that amount on line 44 on form 1040.
Anyone who has had a profit trading 1256 contracts I would love to hear from you Thanks LD

It isn't that simple. Do you have other income? If so then it may be that you are not figuring the worksheet correctly. My only income comes from section 1256 contracts so my results may different than yours. I can send you a sample return though that might be helpful.

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  #117 (permalink)
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wirechild View Post
It isn't that simple. Do you have other income? If so then it may be that you are not figuring the worksheet correctly. My only income comes from section 1256 contracts so my results may different than yours. I can send you a sample return though that might be helpful.

Wirechild Thanks for the help.
I would like to see it can you email it to me
cassadaga at hotmail.com

Put something in the subject so I find it in my junk file
Many thanks
Lawrence

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  #118 (permalink)
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marcopolo1 View Post
Just found out:

Designation of Eurex Deutschland as a “Qualified Board or Exchange” for purposes of Section 1256(g)(7) of the United States Internal Revenue Code

On 7 February 2013, Eurex Deutschland announced that the U.S. Internal Revenue Service (“IRS”)has designated Eurex Deutschland as a “Qualified Board or Exchange” for purposes of Section 1256(g)(7)of the U.S. Internal Revenue Code. This ruling, effective for all contracts entered on or after 1 March 2013, means that U.S. persons that trade at Eurex Deutschland may receive “60/40 tax treatment” in the same way when trading at other U.S. futures exchanges.

https://www.eurexchange.com/exchange-en/resources/circulars/398662/
Internal Revenue Bulletin - February 25, 2013 - Rev. Rul. 2013-5

That's good info. I've been thinking about Eurex futures lately.
The one question I have though is if I trade Eurex futures, do I only owe US taxes, or would their be EU tax liabilities as well? (I'm a US citizen, trading on US soil, from a US broker.)
If you have any info, I'd appreciate it.
Thanks!

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  #119 (permalink)
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BlackSwan04 View Post
That's good info. I've been thinking about Eurex futures lately.
The one question I have though is if I trade Eurex futures, do I only owe US taxes, or would their be EU tax liabilities as well? (I'm a US citizen, trading on US soil, from a US broker.)
If you have any info, I'd appreciate it.
Thanks!

If you are a living in USA you only pay the IRS taxes.

If you are a US citizen, living overseas the USA expect you to still file with the IRS and you may have to pay the IRS tax plus whatever country you are living in.

Hope this helps
LD

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  #120 (permalink)
Trading for Fun
Boise Idaho/US
 
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lawdam View Post
If you are a living in USA you only pay the IRS taxes.

If you are a US citizen, living overseas the USA expect you to still file with the IRS and you may have to pay the IRS tax plus whatever country you are living in.

Hope this helps
LD

Awesome. That's perfect!
Yeah I've been doing research off and on about it and it seems like the fact that no one ever mentions paying foreign taxes, or that I don't need a foreign tax ID number to trade it, implied I would only owe domestically. Thanks for the (non CPA, unofficial ) confirmation.
Btw, Which eurex products do you trade? I'm looking at swing trading FGBS.
Cheers!

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