Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Author: fooltag Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 121061  
Subject: ST Gain Loophole??? Date: 1/31/2000 9:42 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Has anyone heard of a special classification for
someone who generates their income from trading.
(Something like a professional trader) This
classification allows them to avoid short term capital
gains taxes because they are not seen as capital
gains, but rather as income. I think I read something
about this somewhere, but I can't remember where, and
the more I thought about it I can't believe it is 
true. I mean what then stops the card counter from 
being classified as a pro and not paying gains on 
their winnings? Any help/info is appreciated in 
finding out if 
1. There is such a thing.
2. Where I can find more information on it.

Thanks, I love you guys!!!

Lisa
Print the post Back To Top
Author: DowDanny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26553 of 121061
Subject: Re: ST Gain Loophole??? Date: 1/31/2000 10:46 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
fooltag,

Careful, because I am speaking strictly as an uninformed amateur - I could be way wrong.

But what you see as an advantage, I see as a distinct disadvantage.

People choose to be classified as "professional trader" because it allows them to deduct certain expenses and tools-of-the-trade as 'business expenses', plus *I think* it allows them to vastly simplify their Sch D reporting of transactions.

But it doesn't allow them to simply "not pay taxes on ST gains". Note, even you said:
> This classification allows them to avoid short term capital gains taxes because they are not seen as capitalgains, but rather as income. <

Income, means "pay taxes as if it were ordinary wages" - not a very tax advantaged situation. Indeed, *I think* the net earnings of a professional trader are subject to self-employment taxes (aka FICA) so might be doubly disadvantaged compared to capital gains and other "unearned income" which are excluded from Social Security taxes.

In any case, the IRS seems to be quite picky about who they "allow" to be classified as professional trader. The key test(s) seems to be the holding period for individual positions AND the frequency of trading. Even if you are trading 20x a month, if your average stock is held for weeks or months, it is likely you will not classify as a trader.

There are many web sites which purport to describe the advantages and requirements to be a pro-trader. Use your favorite search engine or wait a few moments for someone else to reply to your message here with a better URL.

Cheers,

- Danny

Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
Author: DowDanny Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26554 of 121061
Subject: Re: ST Gain Loophole??? Date: 1/31/2000 10:48 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
"Use your favorite search engine "

Top site from "taxes professional trader" search on AltaVista (f'rexample) :
http://www.greencompany.com/products.htm



Print the post Back To Top
Author: Skwire One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 26567 of 121061
Subject: Re: ST Gain Loophole??? Date: 1/31/2000 11:35 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
Has anyone heard of a special classification for
someone who generates their income from trading.
(Something like a professional trader) This
classification allows them to avoid short term capital
gains taxes because they are not seen as capital
gains, but rather as income. I think I read something
about this somewhere, but I can't remember where, and
the more I thought about it I can't believe it is
true. I mean what then stops the card counter from
being classified as a pro and not paying gains on
their winnings? Any help/info is appreciated in
finding out if
1. There is such a thing.
2. Where I can find more information on it.


You may want to try running a search such as "active trader" in the search feature towards the top of the screen. I note that one post by TMFTaxes that was pulled-up by that search (Post # 13441, titled Trader Status) which contained, among other things, the following:

Since this is not the trader area, you might want to check out the Fairmark (http://www.fairmark.com) tax site. Kaye Thomas does an excellent job with dealing with trader issues.

Best of luck.

"The taxpayer -- that's someone who works for the federal government but doesn't have to take a civil service examination." -- Ronald Reagan


Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post Back To Top
UnThreaded | Threaded | Whole Thread (4) | Ignore Thread Prev Thread | Next Thread
Advertisement