One of the better websites for tax issues is www.greencompany.com You can find answers to many questions and also has info if you like to set up a hedge fund. I bought his book and it has a lot of info in it.
The following 3 users say Thank You to TheLostSoul for this post:
I had a question about Futures Trading Taxes. As a rookie trader, this is my first year day trading part time. Overall for the year I have took about a $500 loss on my account. Basically I would just like to get some input on the best way to go about filing my taxes for next year with regards to trading. I have been told a Capital Gains/Loss would be the best way to go for a new trader. reading the Canadian CRA It also states that speculators may file a capital gains/loss.
The only thing confusing me with this is the Superficial Loss rule. It states buying back a security within 30 days of a loss, will cancel out that loss. So as a day trading, I am constantly buying/selling say gold contracts, so would all of my losses be pretty much be canceled out if I took a trade within 30 days from my loss?
Any advice here would be appreciated thanks.
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I talked with the guy from Taxes for Traders once a few years ago, about trading as a corp, and he seemed pretty knowledgeable. He actually advised me against it, as I was a brand new trader at the time. He advised me to get my feet wet first, learn a trading methodology, and once I am profitable, we can talk about what would best fit my situation.
In terms of trading as a corporation, I definitely advise talking to a 'knowledgeable' accountant, my regular accountant had no clue. In my research, I found various firms have different ideas and opinions about the best setups, some advise multiple corporations of different types, and dependencies, like a C corp's owning an LLC's, etc.
I created a C Corp myself in Delaware, it's fairly easy, but have never traded under it, I'm stuck paying the fees every year now, until I decide what to do with it.
I'm not sure if this is still true but a few years ago I setup a few accounts under an LLC. As a result, the broker wanted me to be classified as a 'professional'. That is not bad except that professional traders usually pay higher fees. The broker said the exchanges require that I pay higher fees as a pro.
I closed all of the accounts and just trade under my own name now so this may have changed recently.
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I am referring to The Superficial Loss rule for buying back "identical property" within 30 days of the loss. The Canadian Revenue Agency says any identical property purchased within 30 days of the loss would make it a superficial loss opposed to a capital loss. The CRA website also states that Future contracts for the same commodity with the same delivery month are considered Identical Property.
So basically my question is, I can not just show a full 1 year total loss statement to my accountant? I will have to sniff out superficial losses since I day trade and most likely took a trade before the 30 day period after a loss? Any suggestions would be great.
Yes, I do think that is correct. You have to weigh if any potential tax savings outweigh the higher professional broker fees, and the additional fees you will have to pay your accountant to prepare additional tax returns for one or more corporations.
I don't know about Canada, but in the states I believe this is the Wash Sales Rule (IRS Publication 550 (2009), Investment Income and Expenses), and it only applies for equities, not futures. That document says "<Wash sales rules>...do not apply to losses from sales or trades of commodity futures contracts and foreign currencies". I think this rule and the pattern day trading rule, which requires a $25K account to day trade equities, were originally intended to keep the run of the mill investors from attempting to day trade and loose all their money.
I've read here (http://www.fool.com/taxes/2000/taxes001006.htm) that to get around the wash sales rules, just don't trade for the last 30 days of the year, or just trade a different stock in the last 30 days of the year, because even if you bought and sold the stock hundreds of times during the year, if you sold all your shares before the last 30 days of the tax year, and did not buy back any within the last 30 days of the tax year, then the rule no longer applies. Of course, I would advise you to verify that with an accountant.
Last edited by monpere; December 12th, 2010 at 10:47 PM.
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