Alright, don't flame me if this idea is too far fetched but, please tryand bear with me. My question is, can a person open up an online brokerageaccount under a business name? What I want to do is come up with a namefor a business, say JW Investments as an example. Then incorporate andbegin trading online under the business name. The sole purpose of thiswould be for tax purposes. But I don't know much about how businesses workas far as getting it started and such, or if this is even a good idea. Ijust figured that this way I could have alot of tax deductions for thingslike rent, internet access, and other expense like investment subscriptionlike WSJ and IBD daily. This is just something I've been pondering latelyso please feel free to set me straight.
In other words, you want to set yourself up as a professional trader; you don't plan to manage anybody's money except your own. In general, the IRS takes a dim view of this. Yes, it would be nice. If you have any other source of income, in other words you are a part time trade, it is very unlikely to fly. If it is a full-time occupation, and best of all, if you make money hand over fist and the IRS is getting lots of taxes, they are likely to let you take deductions for your home office, your subscriptions to market news, charting services, internet access etc. These items, apart from the home office, could be deducted subject to a 2% deduction on Schedule A as miscellaneous expenses in any case, with the annual amount not to exceed investment income. Good luck! Chris
<<The sole purpose of thiswould be for tax purposes. But I don't know much about how businesses workas far as getting it started and such, or if this is even a good idea. Ijust figured that this way I could have alot of tax deductions for thingslike rent, internet access, and other expense like investment subscriptionlike WSJ and IBD daily. >>As pointed out, simply incorporating and trading in that corporation might not be all that worthwhile. You'll still have to show Uncle Sammy that you are actually a "trade or business", and not simply a sham to try and generate additional deductions.Additionally, any qualified expenses that you incurr for your investment or trading activities will be deductible under any circumstances. It's just a question of WHERE they'll be deducted. Before you leap, read my multi-part article on traders and taxes in the Taxes FAQ area. That might give you some insight into another way to accomplish the same goals. TMF TaxesRoy
Thanks for the help, I figured I was way off base. I just wanted to come up with a unique way of dealing with my expenses. Guess I need to go back to the drawing board:)
Fivestarj,I've briefly looked into this myself. Right now, all my investing/trading money is inside an IRA so tax considerations don't exist. Down the road though when I have serious money in a regular taxable account I wanted to explore setting up a business entity to do my trading for the same reasons you mention. It entitles you to many more deductions. Also, corporate tax rates are lower than individual tax rates for identical incomes. From my premilinary research being designated a "trader" by the IRS and setting up a business entity don't have anything to do with each other as some previous posters (erroneously in my opinion) mentioned. The business entity structure involves a limited partnership along with a corporation acting as general partner. Honestly, I am not knowledgeable of all the ins and outs. You may want to check this site: http://www.tradersaccounting.com/They talk about this in more detail. There is also a guy out of Florida (the name escapes me right now) who does seminars and has written some books on this.This appears to me to be a relatively new development, and I think even some tax professionals may not be fully versed on the most recent issues and ins and outs. One thing I've learned recently (especially learning more about options) is that the tax code aint all black and white. There's lots of gray in there.
5*J,Sounds intriguing. I am looking into the sire http:www.tradersaccounting.com as one of the other replies recommended.The best advice would come, of course from a tax professional and I think I'm about to consult with one about this business possibility.Best of luck,SG
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