For what it's worth: Most expenses are considered to be hobby expenses unless traded as a business. There are up to 50 expenses that a "business designated" trader can write off... things like data feed to your puter... cable tv.... power supply for puter... ------------------------------------------------- The more successful an individual is, the higher the tax bracket goes up. A trader's largest expenses are taxes, whether you LOSE or make money. A person trading as an individual, (which is classified by the IRS as an INVESTOR) without business designation is subject to the $3000 capital loss rule, meaning, if you lose say, $23,000 you can only write off $3000. The INVESTOR classification is also subject to wash sales, meaning, if you buy and sell a stock for a loss, you cannot claim that loss if you buy that stock (or derivative) back within 30 days, or, if you owned it 30 days prior. SO, the wonderful $3000 rule doesn't even kick in until all wash sales are calculated. So you can have $23,000 in wash sale losses and actually end up owing Uncle SCAM. In addition, as an INVESTOR classification, margin expenses can only be deducted if the trades that require margin make money. Last, writeoffs for INVESTORS are troublesome with the exception of kids, mortgages and charity because the IRS looks at many INVESTOR expenses as hobby expenses. Even with the allowable write offs, the investor is subject to a 2% threshold, meaning, if s/he had say, $100,000 in income, the 1st $2000 cannot be written off... medical expenses have an amazing 7.5% threshold!! NOW the other plain vanilla designation allowed by Uncle Scam is to be designated as a 'business entity' which includes.......(drum roll please)..... TRADER in SECURITIES election or a formal business structure such as a pass through entity which is an LLC or LP. Or a C Corp, which in my opinion is the top dog. An S Corp shouldn't be considered here because an S corp has to designate 50% income to payroll. Back in the 19teens the rich learned to use corporations to their advantage to reduce their taxes by increasing financial flexibility. Trading with a business election allows the trader to write off EVERYTHING from dime one. C Corp filing allows for extreme flexibility but has some hoops. Now I'm sure I'll see the double taxation argument and others but the bottom line is that EVERYONE is an individual who has their own 'thing' going on which basically equates to research and placing yourself within the structure that best suits you. --------------------------- This is something I posted elsewhere in et. It may answer some questions or may not but you need to speak to a licensed pro about stuff like this, which I am NOT. Maybe consider looking into some free online seminars about taxes for traders from tax professionals to help guide a suitable path for yourself. -Get a TradeKing account maybe as they have tons of archived online seminars. Also, seeing you don't have a problem with putting in "time", maybe research where and how to set up an entity by yourself and possibly save yourself up to a thousand bucks. Online resources are good as well as books on the subject that you can get from Barnes and Noble. I personally have set up a few entities and it isn't that hard. Delaware LLCs and C corps currently seem to be en vogue with the most benefits. Also, why "Weezer"? Besides the fact that they're a great band. A buddy of mine had 3 dogs that were all named Weezer... He said it made things easy (he was a bass player)
Why you need a company to blow up money by daytrading (98%+ failure rate). Maybe you want to blow up other people money too? :eek:
No other people money please, I love to see my family and I like my sleep. Nothing but a headache. The last time I made someone a million dollars ; I did not even get a thank you.
I'm confused... is your business focus day trading or getting other traders to... do something for you?
most of this has little to do with an individual trader like him. he should jack his costs and complexity up to have write-offs? I had a corp - few ETers will ever be in a position where this will help them much. It is unlikely that almost all of what you said is worth it. Especially given the high unlikelihood he will become longterm lucrative. He has a few months worth of money. He should keep it very simple and sweet. I have some agreement with peil. Don't forget, few brokers are going to let a little person like him open an account as a corp or LLC. He will have to cosign everything anyway. And you wanna save taxes, trade your money in an IRA. Again, if you are not profitable though, not gonna help. If you are, very helpful.
TRADERZONES...you really have a problem. The gentleman comes here looking for input. He has obviously been successful in business. He is in good financial shape, has a cash reserve, been putting in the screen time hours and is having success. He obviously is developing a business plan and appears to have a good chance to be successful. Why do you try to discourage him? You obviously do not know what you are talking about on this subject..so do not comment. You are a disruption and negative influence. Go cry to the mods as usual.
So what you're saying is that: A. He's going to lose everything anyway, which is $25,000. and B. Out of his $25,000, you want him to only be able to write off $3000 of everything you say he's going to lose. Please explain to us how this is logical.
A) Your optimism is overwhelming. Anyone still losing $25,000 account should neither be trading real nor setting up companies. I do not recall saying he would be losing "all that money." He claims to be arriving. If not, he should be sim trading or trading small quantities until he is consistently profitable. B) You have to qualify as a trader, which is a lot more difficult than people care to admit. And it does not require a corp/LLC, so it has absolutely nothing to do with this topic. it is logical because you need to stop talking to yourself and actually understand what the OP is requesting.
Quote from martymjp: TRADERZONES...you really have a problem. The gentleman comes here looking for input. He has obviously been successful in business. He is in good financial shape, has a cash reserve, been putting in the screen time hours and is having success. He obviously is developing a business plan and appears to have a good chance to be successful. Why do you try to discourage him? I am sorry you are a paper trader and have absolutely no idea what you are doing here. Next time, try reading the posts and not guessing. You obviously do not know what you are talking about on this subject..so do not comment. SHOW EXACTLY HOW I DO NOT KNOW WHAT I AM TALKING ABOUT. SPECIFICALLY. OTHERWISE, STFU. But you will be on ignore before staying something else stupid, so whatever. Sadly, you will feel the need to talk into the void anyway. It is the only way you will feel good about yourself. Weezer. Do your homework before listening to the clueless. You should do everything based on solid research. Martymjp fell in love with a nut job who claimed he would make 2000% in 65 days but bailed after 4 trades, and is angry when it did not happen. He hoped it was his one shot at becoming profitable. Unfortunately, there is a high percentage of paper traders here like martymjp who react because they cannot think of anything useful to say.