Hi Michael (@ TopStep) ... I am a multi-instrument quant trader, trading: the indicies, metals, energies, grains, and currency futures. Quite some time ago, I inquired about a combine, and discovered that a combine account would be required to be traded as a 'professional account'. Therefore I would be responsible for paying all of the related monthly exchange fees with both a combine, and funded account. Is that correct? Off the top of my head, those exchange fees would amount to somewhere around $500-600/month. If that is the case, isn't there some type of work-around you folks could arrange?
a) Income from trading a funded account becomes usually tax relevant only once its deposited?
b) there is no taxation of the account balance without a deposit ie no annual capital gain tax to be paid on the balance?
I understand you can not give an official binding statement for a) cause it's probably country- and individual-dependent and you are no tax consultant. But a share of.. "experience" would be appreciated there, anyhow.
b) is pretty straightforward I guess & it shouldnt be a problem to give a statement on that.
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Jim- The Trading Combine has one cost which includes everything you need to showcase your trading.
Once you are at the funded level the exchange fees are passed through to the trader. Most funded traders pay no more than $85/month. Though, this does all depend on how many exchanges you want data from.
I hope that helps.
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I was also wondering about this. So, in other words, if a trader doesn't take any withdrawals in the first few years and just build equity, he/she won't pay any tax during that period? Only the withdrawal is seen as income in the hands of the trader not the profits made in the trading account?
I asked my accountant, but he wasn't sure, so I guess I need to change accountants!
I am definitely not an accountant, or even someone very knowledgeable in taxes or accounting, so anyone who would take my ideas on the subject as good advice would have to be crazy.
That said, I have worked as an independent contractor over several years. In the US, which is all I know, a contractor will receive a Form 1099 at the end of the year from whomever he/she did work for. This is also sent to the IRS as a report of your earnings. Now, I was not getting paid for trading; I was a contract computer programmer. But as a contractor, I got paid when (and if) they finally cut a check to pay the invoice I sent them.
No matter how much work I had done, or what I had billed them for, it wasn't my money until they paid it out. That's when I had a tax liability. Figure that you're in business for yourself, and you don't have any income in your business until you get paid for your goods or services.
Does this translate well to the TsT trader's situation? Well, ahem, "seek a professional tax advisor"....
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For me, the issue is on the remaining equity in the account. I don't mind paying the taxman what he deserves to get. But, if you can (legally) delay paying taxes, it gives you more time to increase the equity in your account, and therefore higher possible income in the future.
The issue is explaned as follows: If you make $100,000 as an example for a period, your share is 80% (just to keep it simple, I'll use 80%, but in fact you start at 60% and work your way up to 80%). If you then have to pay 30% tax on $80,000, you will have to withdraw $24,000 from the account. According to the TST rules, if you withdraw $24,000, TST will also withdraw the same ammount (is this correct Michael?). In this case, their share is limited to $20,000.
Which means, your account balance will reduce to $56,000 ($100,000 - $24,000 - $20,000 = $56,000). Now, does that mean your lot size will also have to be reduced by 44%? Since the margin available in the account has reduced?
If this is the case, it will take considerably longer to build equity, if you have to withdraw that much every few months.