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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:

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.

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