Let's say you make money for a prop trading firm and they pay your cut i.e. a portion of the profits. What is the nature of the earnings? I would say "short term capital gains" but it may be more complex than that. Any experience?
Thank you for your answer, Bob. Unfortunately, being European, I have no clue about K1 and 64/40. I guess that's US fiscal stuff. Could you elaborate please? Actually, I would like to know if the fiscal treatment of earnings from a prop trading house does make sense to my situation before applying. If I can't find info here, I will contact some firms to ask them directly.
It will not apply to a foreign prop firm. A K1 is a partnership distribution of profits and losses. 60/40 refers to 60% long term capital gains and 40% short term or ordinary income, We have lower rates for long term here in the US.