A few Roth questions.
1. I read back through the thread and was confused about the issue of daytrading. It seems like in other threads on SI people advise that it might be dangerous to claim to be a trader, that the IRS is rather arbitrary on this and will likely not consider you one if pushed. Reading through here it seems as though the opposite is true, that if you daytrade an IRA the IRS is going to classify you as a trader. Is that about right?
Real world example. I'm not currently a daytrader but will be soon. Even so this will not be my sole income source(also have a small business) it may be my biggest source or not depending how good I am. If I daytrade on my own and also in my Roth will the IRS constitute me as a broker.
Same question for my mother. She will be retiring soon on a disability. I was thinking of switching part of her IRA into a ROTH to put into more speculative plays, write covered calls and to occasionally daytrade.(She'd basically be sitting here doing the same as me on a different computer.) She will be taking disbursements from the regular IRA and leaving the ROTH alone, would she likely get in trouble?
I do know it is difficult to daytrade an IRA at most places. I have one with Waterhouse and there is never a correct acct. balance if there's any activity at all. MB Trading a popular daytrading firm told me that they could handle phone executions but not automatic executions in a cash acct., they hoped to have this computerized in 30 days or so.
2. I read in one article on the thread where you could take the money out of your IRA and put it back tax free if it's done within 60 days. That article mentioned that you could do this repeatedly, I thought it was only once a year.
For instance let's say I have a 100k normal IRA and it's all cash. Can I transfer the money to my bank acct., play with it for 2 months, then put it back, and take it back out and play with it for two more months? Would the IRS check my bank records to see that the 100k was not being used or do they care? Is it the same for a Roth?
3. I read somewhere in the past few days that you don't have to start your Roth before Jan. 1 1999 to get the 4 year tax spread. All you had to do was take a disbursement from your regular IRA before that day, then you had the 60 days to start your Roth with that money. Is this correct?
As far as my mother's IRA I made a couple of spreadsheets in EXCEL because none of the calculators seemed to take everything into acct. and it looks like about a tossup on whether to convert or not. My thoughts are only to convert a small portion to put towards more volatile investments. It looks good having it all tax free, but I think that sometime in the next 30-40 years that she has left to live the tax laws will change. I think as more people that have IRA's retire and begin taking money out, pressure will be put on congress to exempt or lower taxes on this. If not that, then maybe a sales or flat tax will be implemented. I can't see it getting much worse than right now and it could get a whole lot better. Also I don't trust the govt. to keep their end of the deal. What's to keep them from coming back 10-20 years from now and re-instating the tax on ROTH distributions over a certain amount, capping the size a ROTH can grow to, etc.
EGB |
