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The Tax Thread
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The Tax Thread

  #61 (permalink)
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josh View Post
I deduct things like my office equipment using section 179 so I can deduct it all at the same time. I do not deduct anything currently where I have to depreciate it, as I used to when I owned rental property. But this doesn't answer my question as to why a corporation is necessary for these deductions?

Another common belief, that a corporation like an LLC provides protection for personal assets, is misunderstood--if it were that easy we would all just operate under an LLC and be liable for nothing.

we are changing subjects, but a properly structure SMLLC will in fact protect you as long as your corporate veil cant be pierced.. since you do RE, it is no different than the reason why one should have each rental property under its own LLC and ensure that one operates them as completely individual companies, etc. IMO the only way to "protect" personal assets is not have any and become judgement proof.. there are 1000's of way to protect assets (all legal) so not going to run into that given it is a rather personal thing creating an asset protection plan.

As to the LLC for trading.. in my case, I my earnings take me into AMT land very easily.. so as I said before, my opinion given my circumstances is that is easier to create an LLC... my "deductions" are engineered to lower my tax liability... as an investor, you cant have a soloK and write off "contributions"... there are other examples, I suggest you re-read the information within the posts and possibly visit the greencompany website and watch the webinar recordings...

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  #62 (permalink)
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Not convinced you need an LLC

I'm no tax expert, and as a foreigner living in US, I'm still learning about US taxes. But, I'm also not convinced you need an LLC. Besides all the additional paper work and tax forms, you need to keep your LLC which will cost you money. You also will need to pay State business taxes, IL for example, you pay 9.5% business taxes.

On the other hand, from the IRS's perspective, the business (sole proprietorship) is not a taxable entity. Instead, all of the business's assets and liabilities are treated as belonging directly to the business owner.

Can someone give me some concrete example (doesn't need to be personal or too complex, but say, a trader makes 200K trading, pays 1k to keep the LLC/year, pays 19K state tax , etc. etc...)? It seems to me that you will spend a lot more money with an LLC than a sole proprietorship. I find it really hard to justify all the additional work and expenditures, considering that if you have trader status you can itemize your business expenses.
Am I missing something here?

It would be very helpful for this thread if someone could break this down in simple terms, without referring (with all due respect because they are also helpful) to other links or references that just adds to the confusion...

Thanks!


Last edited by dstrader; April 6th, 2011 at 11:39 PM.
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  #63 (permalink)
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why is that people always need to be convinced of things? are you not capable of conducting your own research and arriving to your own conclusion from the materials provided? you do realize that everyone's situation and circumstances are different, right? what I find of use, will or might not be what you find of use about trading under an LLC.

there is quite a bit of information posted on the subject already on the website, I would suggest you do your homework and read up on the matter, or reach out to a subject matter expert, express your setup/situation and be guided by a proper professional.

I personally see the benefit of being able to reduce my overall "taxable" income as a benefit to an LLC as I can contribute to my own SoloK account. I can also write off other expenses such as insurance, education, etc. without limits or worrying about audits.

Please note that though an LLC is disregarded for tax purposes by the IRS, it can become an entity by its owners or managers electing to have it treated as a corporation(C/S) or partnership (if more than one member)

Also, the "paperwork" is rather not complex.. an annual report is filed along with a fee of around $250 depending where you reside. Also, please keep in mind that trading income is not viewed as "earned income" so it is not taxed as such.

I chose to trade under an LLC at the beginning of the year because I want to fatten up my SoloK trust for other purposes. The PDF I attached from Green Company does cover what you are asking in some level of detail, and there are also webinars on the site that explain the presentation. I can only suggest you take a look at it and see if it is for you, or not.

It might very well not be for you.


dstrader View Post
I'm no tax expert, and as a foreigner living in US, I'm still learning about US taxes. But, I'm also not convinced you need an LLC. Besides all the additional paper work and tax forms, you need to keep your LLC which will cost you money. You also will need to pay State business taxes, IL for example, you pay 9.5% business taxes.

On the other hand, from the IRS's perspective, the business (sole proprietorship) is not a taxable entity. Instead, all of the business's assets and liabilities are treated as belonging directly to the business owner.

Can someone give me some concrete example (doesn't need to be personal or too complex, but say, a trader makes 200K trading, pays 1k to keep the LLC/year, pays 19K state tax , etc. etc...)? It seems to me that you will spend a lot more money with an LLC than a sole proprietorship. I find it really hard to justify all the additional work and expenditures, considering that if you have trader status you can itemize your business expenses.
Am I missing something here?

It would be very helpful for this thread if someone could break this down in simple terms, without referring (with all due respect because they are also helpful) to other links or references that just adds to the confusion...

Thanks!


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  #64 (permalink)
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Commodity Trading Taxes

I am a struggling trader who may be turning it around and like many have that dream of trading for living. I wanted to look up the tax commitment on how it it should be handled and found this article: Taxes on Commodities Trading .

Which in summary says: You will receive a 1099B from your broker which you will state your profits and losses for the year, subtract the losses from the profits and that will give your capital gains.. Here is where I found it most interesting: " There are favorable tax rates for commodities as they are taxed at 60% long-term capital gains and 40% short-term capital gains. Long-term gains are capped at 15% and short-term gains are taxed at your ordinary tax rate, which depends on your adjusted income. You do not have to worry about accounting for and listing each individual trade on your tax returns. You just need to know your net profit or loss."

He goes on to show an example calculation. I didn't hear any of you mention this but this would be great news. Unfortunately I didn't see a date on the article but I was hoping some of you who are profitable and have a kick ass CPA could confirm this?

P.S. Also as a side note on figuring out profitability for trading I am starting with a profitability target/goal and just wanted to see what the tax ramifications etc are and how much my targets should be per day/week etc. There appears to only be approx. 250 trading days per year. I was wondering if any of you actually kept a log and have a good idea of how many days you realistically trade. I know some weeks around holidays many of you sit aside and of course vacations and crappy trading keeps you out.

Thanks, James

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  #65 (permalink)
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JVentura View Post
I am a struggling trader who may be turning it around and like many have that dream of trading for living. I wanted to look up the tax commitment on how it it should be handled and found this article: Taxes on Commodities Trading .

Which in summary says: You will receive a 1099B from your broker which you will state your profits and losses for the year, subtract the losses from the profits and that will give your capital gains.. Here is where I found it most interesting: " There are favorable tax rates for commodities as they are taxed at 60% long-term capital gains and 40% short-term capital gains. Long-term gains are capped at 15% and short-term gains are taxed at your ordinary tax rate, which depends on your adjusted income. You do not have to worry about accounting for and listing each individual trade on your tax returns. You just need to know your net profit or loss."

He goes on to show an example calculation. I didn't hear any of you mention this but this would be great news. Unfortunately I didn't see a date on the article but I was hoping some of you who are profitable and have a kick ass CPA could confirm this?

P.S. Also as a side note on figuring out profitability for trading I am starting with a profitability target/goal and just wanted to see what the tax ramifications etc are and how much my targets should be per day/week etc. There appears to only be approx. 250 trading days per year. I was wondering if any of you actually kept a log and have a good idea of how many days you realistically trade. I know some weeks around holidays many of you sit aside and of course vacations and crappy trading keeps you out.

Thanks, James

I don't know a lot about it...I let my accountant deal with it, anyway you can talk to these guys, they might be able to help. Traders Accounting - Services for Day Traders - Taxes, Accounting, Business Strategy

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  #66 (permalink)
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This is a video from the Mirus Futures site under archived webinars for public viewing. Traders Accounting talk about several topics of general interest.
regards.

http://www.mirusfutures.com/education/free_webinars/events/2011-04-07/webinar-tax-efficient-trading-futures-trading-tax-mans

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  #67 (permalink)
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a never ending quest.....

Lessons from the Pros - 02/07/2012 Issue - OTA Tax Pros Article: Should I Incorporate?

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  #68 (permalink)
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tax season in high beam...

http://www.tradingacademy.com/lessons/20120131/tax_pros_article.htm

Lessons from the Pros - 02/21/2012 Issue - OTA Tax Pros Article: Take Charge of Your Retirement Account

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  #69 (permalink)
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my mission for 2012 is to make my account tax free.
what? pay tax to bail out billionaires? not me.

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  #70 (permalink)
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jz166 View Post
my mission for 2012 is to make my account tax free.
what? pay tax to bail out billionaires? not me.

So, you plan to lose money? How else do you make your account "tax free"?

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