Anyone at a prop firm that issues K-1's can answer this...you deposit $10,000 with a prop firm to open an account;you earn $100,000 in stock dividends during the year and you have $100,00 in capital losses from trading.At the end of the year,your balance is right where you started at $10,000.My question is this...would your reported income be 0 leaving you with nothing to pay in taxes;or would your taxable income be the $100,000 in dividends?Does the $3000 capital loss deduction limit for investors also apply to prop firms?
I believe the gains losses are aggregated to a total gain/loss at the end of the year, so in this case - yes, they would offset. My understanding is that the loss you can take is limited, not to $3000, but to the amount of money you have at risk with the firm, so the limit you could deduct in losses would be - your first year in the LLC = your capital contribution, and in subsequent years = your "basis" for that year, that is, your acct balance at the end of the prior year. I understand that you can usually carry forward unused losses to subsequent years. I am not a CPA so please don't make decisions based on only this information..