Cme Seat Lease

Any opinions on this? It looks like you save 1.50 RT and you have to pay $1500 per mth for the seat lease. However, you also have to pay Self Employment tax too at approx 15%. I do about 100 round turns per day. So I will save approx $3k per mth ( 1.50 x 100 x 20 days) - but i will spend $1500 per mth for the seat lease - and now i have to pay 15% self employment tax - dosn;t seem worth it - am I missing something? Any advice appreciated.

 

Hmmm. Self-employment tax. If you're employed anywhere you pay 1/2 the self-employment tax, so self-employment tax amounts to the employer's half, about 7.5%. Even if employed somewhere by an "employer," that employer's half comes out of your pocket.

It could be that you pay self-employment tax no matter how you look at it. Sometimes things are given different names, like "employee's half" and "employer's half". The tax is the same, regardless of the name given to it or any of its parts.

 

$1500 lease fee is a one off not monthly fee

 

No, the seat leases are going for about $1500 a month (full CME or IOM?) and there is a one-time $2000 application charge to the Merc.

 

so where is the benefit? I feel like I am missing something. It doesn;t seem all that advantageous.

 

It does not appear that it has all that many advantages for you, that doesn't mean it has not got any for someone else.

 

What do you trade, and what type of seat are you looking to lease?

 

Not if you are trading futures. I don't want to give out tax advice here but you appear to be unclear about this topic.

 

Members of futures exchanges are subject to FICA tax on their section 1256 contracts income. Nonmembers are not subject to FICA tax on their section 1256 contracts income.

IRS Code Section 1402:

(i) Special rules for options and commodities dealers

(1) In general
Notwithstanding subsection (a)(3)(A), in determining the net earnings from self-employment of any options dealer or commodities dealer, there shall not be excluded any gain or loss (in the normal course of the taxpayer’s activity of dealing in or trading section 1256 contracts) from section 1256 contracts or property related to such contracts.

(2) Definitions
For purposes of this subsection—

(A) Options dealer
The term “options dealer” has the meaning given such term by section 1256 (g)(8).

(B) Commodities dealer
The term “commodities dealer” means a person who is actively engaged in trading section 1256 contracts and is registered with a domestic board of trade which is designated as a contract market by the Commodities Futures Trading Commission.

(C) Section 1256 contracts
The term “section 1256 contract” has the meaning given to such term by section 1256 (b).

 

Yep, the previous guy was stating it ddn't matter and everyone was trading futures is subject to FICA. That was the issue at hand.