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Hello Dozer:

I agree with irasmilo; however I will give my default position as follows:

1. Given the activity & timing; you will be classified as "active" and a "dealer"; therefore no capital gains treatment as a general rule; instead all gains/losses on all transactions will be considered ordinary income.

2. You should "incorporate" (and I use the word losely) in some fashion either as a "S" corp or LLC for three reasons: one, to protect your personal assets; two, to the extent you get in a borrowing situation, all the banks are going to want to see you incorporated; sometimes the banks even go a bit overboard and they want to see a corporation for each major porject. Third, and equally important, as a sole proprietorship, 100% of your net profit is treated as wages and is threfore subject to SE tax @ 15.7% or so up to approx. $82,000. If you incorporate, you can divide the entity's net income into two piles: wages to you and the same SE tax applies versus distributions to you. The distribution flows to you tax free but of course that leaves net income in the corp. on which you must pay regular income tax; the net is that you can shelter some of the net income of the entity from SE tax but you can not shelter it from regular income tax. The net effect of this splitting of net income is just modestly in favor of incorporation; depending on circumstances a couple of thousand dollars.

3. At least in Colorado, and this may change depending on your state of domicle, the preferred organizational structure is an "S" corporation.

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