I wonder if the price to lease a seat will go up because of the attention from this thread. IDEM is cheap to lease last I checked. Sometimes I wonder why guys trade high volume on SPY when they can trade the ES with less money and better taxation structure,(unless of course they are trading for rebate commissions and are trying to scalp the tighter spread, or there firm doesn't offer futures.) Am I right? http://www.elitetrader.com/vb/printthread.php?threadid=46312
Futurestrader..........thanks for the cost info........you seem very knowledgeable............is the ECM program coming to an end or will it be renewed???? thanks in advance
I traded at the Cbot for quite a while. I traded also at CME. I now trade at home and have for the last few years. I was trading the ES back then and now I am back trading it again this year. I trade just as fast on a high speed cable internet connection. I was worried at first but could not hardly tell a difference and still cannot. Just alot less noise. But not going into an office everyday is something you may want to take your time to adjust to. Changing enviroments is challenging in any business ---especially this business. And all YM traders that a trading volume can buy themselves a seat on ECbot to trade it. It had a rock bottom price and probably still does. But make sure you compute that Self employment tax ---do the numbers.
For completeness regarding dealer status, the following is a direct link from the IRS site for tax code definitions. Search for "commodities dealer"... the official definition is about 90% down the page. http://www.law.cornell.edu/uscode/html/uscode26/usc_sec_26_00001402----000-.html Government efficiency at it's finest... partnered with Cornell Law School, using free labor to keep the tax code maintained online! LOL
I'm a member of the CME yet they don't seem to release that info. Current expiration is Dec 2006. Original expiration was October 2005. I am not sure if this will be continued or not. I believe, from a business perspective, the exchange will either have to provide some creative leasing options, continue the ECM (which, by the way, is still very expensive considering the total incremental cost of being a member) or eliminate many of the retail traders from trading it. The cost without the ECM is around $2.56 (haven't looked for a while) per turn at non-member rates. Hence, this adds $1.68 per turn to the retail guy. This will result in a drop in volume but I don't know by how much. On the other hand, the ECM was a way for the CME to promote FX and Index trading on their exchange. Given the growth of volume year over year, they might not need to promote any longer. The ER2 volume is very healthy and the 6E contract is very popular now. I hope they continue the program. While they continue this program, though, they undercut the members who have or are paying for seats to trade the same products even though we pay much less. Sorry I can't be specific. I just don't know.
If you are leasing a seat, is that considered to be the same as ownership? Does the self employment tax apply to leasing? Thanks
If you lease/buy the seat in the name of a corporate entity, does it have to be a non-pass through in order to avoid SE tax? Assuming you have a single member LLC treated as sole proprietorship for tax purposes, if you lease the seat in the name of your LLC, are you still liable for SE tax?
1258(d)(5)(B)(ii) Commodities Trader. -- The term 'commodities trader' means any person who is a member (or, except as otherwise provided in regulations, is entitled to trade as a member) of a domestic board of trade which is designated as a contract market by the Commodity Futures Trading Commission "entitled to trade as a member" includes leasees. Futures contracts and options traded by commodity and options dealers are generally called " §1256 contracts" for tax purposes. Gains and losses of a commodity and options dealers from trading §1256 contracts are treated as capital gains and losses, and net capital gains are treated as self-employment income for FICA purposes. If you have a biz you can take a reasonable salary, pay SE tax on it and take the rest in corp profits (dividends) and not pay SE tax on the dividends. If you try to take 15k in salary and 200k in dividends , thereby attemping to avoid SE tax on most of the income you will end up in court. You will notice they have neatly assigned SE tax to ALL 1256 contracts meaning that you pay SE tax on all profits generated from trading futures no matter what the legal structure of the trader/ trading entity if you are deemed a dealer.. There are different rules for each state re: expenses for the entity and taxation. You must deal with a pro tax atty/ accountant who is familiar in your state of residence. The expenses of an entity can vary hugely. Bottom line is there is no easy way out and most people are better off trading as an individual and buying strong home owners/ auto liability policies. The essense of a corp is simply limited liability, protecting assets. LLC is an acronym for limited liability co. Corps are an ongoing expense, completely understand what you are getting into from a proffessional before you leap.