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This is my first opportunity to post on this board. I'm a California resident

OK. First bit of info. As a California resident, California taxes all of your worldwide income. You may qualify for a credit if some income is double-taxed.

and I've been trying to determine if there is a way to put my portfolio into a Nevada LLC, a state with no taxes, and using the company to capture the dividends and capital gains, but allow me to control them without having to claim it as 'out of state income?'

Not really. By default, a single member LLC is ignored for income tax purposes. So all of the LLC's income would be reported on your personal tax return just as if you owned it directly.

You could elect to treat the LLC as a C corporation. But C corporations don't have a special tax rate for dividends and long term capital gains, although they do get to exclude 85% of most domestic company dividends from their taxable income. Further, they can only use capital losses to offset capital gains. There is no $3k allowance that can be used against other kinds of income. And if you get too much income in a C Corp from investments, you'll run afoul of the accumulated earnings tax and something else (whose name escapes me for the moment). Essentially, those will make all of the corporation's income taxable at the highest individual tax rate.

So a C corp is a flop as a tax shelter.

But an LLC can also elect to be taxed as an S Corp. But there, all of the income flows through to the shareholders, and is reported on their personal income tax return. So we're again back to showing all of the income on your personal return.

... is this doomed to failure?

Yes.

The only person who wins with these schemes is the guy who sells you on the idea and gets you to fork over a bunch of money to form the LLC (or Corp) and then disappears when the state shows up asking for a bunch of money for back taxes, penalties, and interest.

--Peter
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