Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : IRS, Tax related strategies--Traders -- Ignore unavailable to you. Want to Upgrade?

To: Box-By-The-Riviera™ who wrote (248)	3/25/1998 11:32:00 PM
From: Robert A. Green, CPA	Respond to of 1383

Joel, thanks for your self-employment tax points. I agree with you on this point as well as the many other good points you have made on this thread. I did not focus on this point in my earlier guide editions because most traders electing the mark-to-market accounting method would do so because they have losses not income. Excerpt from our TRADER TAX RULES & TAX RETURN REPORTING GUIDE - EDITION 3, on self-employment taxes. 4. Investors are not subject to self-employment taxes on capital gains. Traders are also not subject to self-employment taxes on capital gains. Traders electing the mark-to-market accounting method convert capital gains to ordinary gains that are reportable on Schedule C, rather than on Schedule D. A Trader's Schedule C net income is considered earned income subject to self-employment taxes and available for retirement account contributions. ú For tax year 1997, many traders have mark-to-market losses at year-end due to the declining year-end securities markets. Therefore, their mark-to-market positions probably result in ordinary losses rather than ordinary gains. In those cases, self-employment tax is not an issue for them in 1997. ú For 1998, an electing mark-to-market trader in securities can form and trade through an S-Corporation and thereby not be subject to future self-employment taxation on this ordinary income. S-Corp gains or losses flow-through to their owner's individual income tax returns. Flow-through income from a Schedule C, partnerships, and Limited Liability Companies (LLCs) is considered earned income (for owner/managers) for self-employment tax purposes. Our firm incorporates many new S-Corps and other legal entities through BizFilings (see our Web site greencompany.com, go to Legal & Incorporation, go to e*Commerce tax guide, go to Cybercorps). In our opinion, using an S-Corp. for your trading reduces IRS scrutiny (versus a Schedule C), gives you legal protection, and allows you to take more business expenses (contact us about this point).