Tax strategy to preserve returns?

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leveragedopinion
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Tax strategy to preserve returns?

Postby leveragedopinion » Sun Nov 30, 2008 10:23 pm

Although I'm still at the beginning of this very long journey, I am anticipating the day I may keep my job because I like it, not because I need it, and I am wondering how do you protect your winnings from uncle sam?

If I wake up and trade every morning, five days a week, profitably, but my annualized after-tax return (as % of investment) is equal to a US treasury, then I am just "playing a video game", that makes money, but the same money could be made by buying a treasury and doing nothing.

So how do I maximize the percent of my winnings that I get to keep?

I'm looking for feedback from anybody who makes all, or a majority of their income from trading.

Thanks in advance.

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Ztrader
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Taxes - the topic all traders want to avoid

Postby Ztrader » Tue Dec 16, 2008 7:26 am

Look at trading with an entity, makes deducting expenses easier.
http://www.greencompany.com/Traders/Tra ... ices.shtml
http://www.greencompany.com/Traders/Guides.shtml

FREE Trader Tax Action Plan
http://www.tradersaccounting.com/produc ... 250&page=1

I trade futures: 60% long term cap gain / 40% short for any length trade.
for forex:
http://www.greencompany.com/EducationCe ... 2008.shtml

leveragedopinion
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Postby leveragedopinion » Tue Dec 16, 2008 11:15 pm

Ztrader,

Thanks so much for the links.

If anybody else on other forums has the same question, I'll refer them here.

Taxes are a little-discussed topic in the FX world, so, thanks again.

LO :D

brwkem
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Postby brwkem » Wed Dec 17, 2008 1:56 am

so if your trading currencies is it 60/40?

Ztrader
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Postby Ztrader » Wed Dec 17, 2008 10:01 pm

I need to clarify - I trade future indicies, not single-stock futures. Single-stock futures (SFCs) are taxed like their underlying instruments = stocks (and not futures/commodities). Most profitable futures traders DO NOT elect mark-to-mark, IRC 475, as the favorable long term capital gain is better. Not exactly certain here - Somewhere I read something like - 10 or more items make it a broadbased (?) index with the 60/40 treatment as opposed to narrowbased. Not sure which way futures on currency are taxed. My guess, based on the above, is that a currency future contract would be taxed as ordinary income.

Futures are marked-to-market at year-end = unrealized gains and losses on open positions are reported during this tax year.

I don't trade forex ! so my understanding in that tax area is weak. I think Spot is taxed as ordinary, forward may have a chance at 60/40. Your tax decision/elections is influenced by if you have profits or large losses for the year. Check on electing out of IRC 988. Homework is required because the tax code is so clear.

PS just went to DNC.org, they have removed the tax calculator that was there pre-election showing how much $ I would save. I did send them an email asking them to explain how my taxes would go down, < 250k, when the long term rates going up. Never got an answer.

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eudamonia
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Postby eudamonia » Wed Dec 17, 2008 10:49 pm

FYI not a tax advisor, however, Forex is taxed like Futures 60/40.

Also, you can elect to trade Futures accounts as your 401(k). This can be a good way to lock in profits and delay paying taxes.

BTW if the most I could make was what a treasury or ETF stock index returned then I would quit trading.

Edward
Eudaimonia (pron.: you-die-moan-e-a) (Greek: εὐδαιμονία) is a classical Greek word commonly translated as 'happiness'. The less subjective "human flourishing" is often preferred as a translation.

Ztrader
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Postby Ztrader » Mon Dec 29, 2008 5:40 am

Christmas kept me busy having fun.
A few brief points:
I like Roth IRA trusts to do the most trading in, totally US tax free, I think state tax free also( I'm in a state with no state income tax) - at age 59 1/2
Roth's may start disappearing http://www.rothira.com/ , if you don't have one look at getting one NOW 2008 if you are eligible.

Future indices are not EFT's . like forex , allowing you to leverage. Quick check with 2 brokers give me 8 to 90 times leverage.

"If you trade 1256 contracts, (commodities & futures) all gain or loss is treated as 60% long term and 40% short-term capital gains and losses."
from www.tradersaccounting.com
Currency traders need to see if they trade 1256's or not.

I've been researching taxes for myself and structured entities. Looking at getting licenced as CTA, CPO, & hedge fund manager. Lots to read to make the best choices.

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Postby gustofusion » Thu Jul 30, 2009 4:21 pm

Do like this man did...

Image

Outside the Bristol Zoo, in England, there is a parking lot for 150 cars and 8 coaches, or buses.

It was manned by a very pleasant attendant with a ticket machine charging cars ?1 (about $1.40) and coaches ?5 (about $7).

This parking attendant worked there solid for all of 25 years. Then, one day, he just didn't turn up for work.

"Oh well", said Bristol Zoo Management - "we'd better phone up the City Council and get them to send a new parking attendant . . . "

"Err . . . no", said the Council, "that parking lot is your responsibility."

"Err . . . no, said Bristol Zoo Management, "the attendant was employed by the City Council, wasn't he?"

"Err . . . no!" insisted the Council.

Sitting in his villa somewhere on the coast of Spain (presumably), is a man who had been taking the parking lot fees, estimated at ?400 (about $560) per day at Bristol Zoo for the last 25 years. Assuming 7 days a week, this amounts to just over ?3.6 million
($7 million - or $280,000 every year for 25 years)!

And no one even knows his name!

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noone22
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Postby noone22 » Thu Jul 30, 2009 11:59 pm

What about registering company off-shore (Kayman Islands, etc)
and open a corporate Forex account. This way all you have to pay - is
company management fees, enjoying tax-free benefits.

Uncle Sam still may put a hand in your pocket
or simply prohibit such a manipulation, I don't know exactly.

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