Managed Account Tax Burden

Discussion in 'Taxes and Accounting' started by BasketTrader, Sep 13, 2007.

  1. I really need to start a debate on the BassAckwards tax schemes in the U.S. Axe-grinding accountants who also sell entity formation kits need not reply. If an active pro trader is batching positions to a client/friend omnibus-acct tied to his/her master, I'm interested to hear how those sub-accounts are marking to market.

    If a Registered Investment Advisor's sub-account client requests his/her account to be highly traded, how can this be set up so that the client doesn't create a tax burden? I suppose one way is to create a pass thru entity with a trading objective, but that's not very reasonable for 2 or 3 clients.

    There are hedge funds which use quantitative models that require a high volume of trades whereby mark-to-market accounting is required. One accountant has told me that "Generally, managed accounts do not qualify for IRC 475, since another person is doing the trading." The 'other person' is the Advisor/Mgr. So are we to conclude that such trading models are only available to hedge fund customers? There has to be a simple solution. Qualified replies only please. Thank You.
  2. Anyone actively trading managed accounts?
  3. MGJ


    I assume that what is being traded is spot forex, correct?
  4. Currently, I am trading accounts for my friends as a favor.

    I am trading only 2 to 3 trades a week and may be 10 trades a month.

    Both of them are tax deferred. I am not aware of any issues...

    Should I be...

    Any advice...

    :confused: :confused:
  5. I use the IB Advisor account system for my fund. Every subaccount gets its own tax documents and is under the control of the account holder. I just take the positions and make the market moves and they get the tax bill. Problem solved. I don't have to do anything for billing either. I get a set amount at a set time and every body knows what they are getting.
  6. MGJ:

    No, I am referring to equities(stocks). Futures and Forex are taxed differently except for SSFs.