K-1 for foreign trader

Discussion in 'Professional Trading' started by alientrader, Jan 31, 2007.

  1. Okay,

    So i am getting conflicting advice here.

    I am a non-resident alien, executing my trades from Europe, trading the US markets.

    Last year, I was a member of a trading LLC. This account is a "retail-subaccount", and I am being paid out on a K-1.

    I have to pay US taxes on that K-1, correct? or do i simply pay taxes to my goverment and ignore the US side?

    Any advice would be deeply appreciated.
  2. tomchun

    tomchun Guest

    under USA law, foreign account does not need to pay any taxes to usa government no matter where u open your account... period....
  3. Does this apply to a foreign company?
  4. This is not what some accountants have told me.

    They have advised that i owe US taxation because i am trading through an LLC. Some have advsied otherwise

    This is quite confusing.

    In the event that as a non-resident alien, you do not file, how would the IRS know ?

    Anyone have any thoughts on this?
  5. OK, it works this way. The LLC is taxed as a Partnership. As such it files a Partnership Return (Form 1065). As you said you get a K-1. Your Schedule K-1 will show all kinds of mumbo jumbo. Let's discuss three classifications:

    1. Securities gains and losses: Not taxable in the US if you are a nonresident alien and the gains or losses are not connected with a US trade or business.

    2. Dividends from US companies: Taxable at the rate of 30%, and the partnership is required to wihhold and pay the money to the IRS. The rate may be lower if you are a resident of a country with which the US has a tax treaty.

    3. Interest: Some interest is taxable, also at the 30% rate (or lower treaty rate). Interest from US banks, paid to a nonresident alien not engaged in a US business are generally exempt from US income taxation. (Congress doesn't dare change this...it would really screw up the US economy.)

    This is some pretty complicated crap.

    Good luck.

  6. I don't have any clients outside of the US, but do work in alternative investments (private placements), as part of our private wealth management platform. The K-1 is confusing, and not all accountants know what's what. exQQQQ is correct in this advice. My advice: find an accountant who has dealt with high net worth clients, and you should be able to rely on their advice. Take care!

  7. Thanks guys

    very much appreciated

    Btw, what is meant by connected with a US trade/business?

    I am a member of the said US llc, but i executed all my trades from europe and have never set foot in the USA.
    Am i deemed connected?
  8. The term "connected with a US trade or business" was just a caveat inserted by me. In other words, let's suppose that even though you are a nonresident alien, that you were the owner or otherwise involved with the operation of a trade or business in the US. If that business received income from a US bank it would be taxable. It is in the law so that a US owned business would not be at a competitive disadvantage with a foreign owned business. Obviously if you were receiving income in connection with US investments, it would not be US business connected.

    Based on the facts in your posting it is highly unlikely that this is part of a US trade or business.

  9. Can anyone give a IRS pub reference to the securities gain for non-resident aliens?