Off shore trading

Discussion in 'Professional Trading' started by praetorian2, Apr 12, 2002.

  1. bone

    bone ET Sponsor

    I haven't gone offshore yet. I've talked about it with my CPA and attorney, but the risk doesn't seems worth it to us at this point. It seems to me that you could be smarter about taking more deductions and business expenses here in the U.S., pay a much more reasonable tax rate, and be able to sleep at night. Do you take a home office expense? How about charitable contributions and unreimbursed business expenses? Set up a Partnership or S-Corporation (tons of deductions). Pay your wife a salary. Max out your 401K and Keough plan. Mortgage as much real estate as you can. The interest is deductible. I managed to get my true tax rate down to 25% and I'm upper 2% bracket. Chicago and NYC have specialized CPAs who advise professional traders - I know, I have one. Why would you be so cheap about spending a few hundred bucks to consult a good tax lawyer or CPA that knows the securities industry? Those fees are deductible.

    P.S.- Citibank was just forced to hand over to the I.R.S. records of their U.S. customers with EFTs from certain popular overseas banks. Be careful.
    #11     Apr 12, 2002
  2. Banjo


    I've been around the block with this subject . I was an international biz. man with extensive traveling. A short primer:
    Everything depends on how much $$ you're talking about saving versus how much you have to invest to accomplish that end.
    If you're just making less than one 1million a yr. the way it's handled is to find a state with no personal income tax, ie Nevada, Fla, etc. This means you have to move or present to the state you currently reside in the illusion of having moved . Example, I live in Calif, pay top rate, about 11% plus 39% to the feds. on one million gross taxable income. I buy a house outside of Vegas in a nice upscale community for 300k, there are many right now. In three yrs the tax I didn't pay in Ca. pays for the house plus the house goes up in value if I chose well and if I live there for three yrs. and sell I get to keep the first 500k, if Im married, of profits tax free. If I sold the houseI lived in for more than two yrs out of the last five in Ca. before I moved to Nev. and realized 500k profit I wuld keep that tax free also. It is entirely possible by taking advantage of current tax laws that within 3 yrs I can realize 1.3m pocket change just moving around a little. Of course you have to measure against this lifestyle changes, medical, educational if children etc.
    Let's say I like the beach . A second home mortgage is tax deductable, I get a nice little pad some where between Malibu and Mission Bay San Diego. My primary residence is Nev. so I still pay no Ca. state income tax, just real state tax. I can rent it out and have a nifty little side biz.
    Point being that your time will be much better spent doing some resaerch and applying yourself to creative manipulation of existing laws. This is how smart guys do it, rich smart guys are another story, well save that discourse for later.
    #12     Apr 12, 2002
  3. Banjo


    Forgot to mention, I'm not an attny or account, just a dude that's that's been around the block a few times.
    #13     Apr 12, 2002
  4. the ultimate trading vehicle is the roth tax ever no matter how much you can build it up too.the problem is how do we get the money into a roth.if you have other tax defered accounts already its not hard to roll into a roth.
    that just leaves the problem of shorting but i have heard of some brokers that allow buying puts in an ira.
    #14     Apr 12, 2002
  5. The ultimate trading arragement is a non-US person trading in a no tax offshore country with a prime brokerage account; making them not subject to Reg. T, capital gains taxes or regulators.
    #15     Apr 12, 2002
  6. Banjo


    There you go, metooxx gohas it right
    #16     Apr 12, 2002
  7. vhehn,

    If you are making more than certain amount, i donot think you are eligible for Roth.

    Remember the good old day.. you can open a Roth with Etrade, put in $2k watch you $2k grow really fast just sigining up for IPO.
    #17     Apr 12, 2002
  8. You need to have a non personal entity like a corporation or LLC offshore that can be funded and whose profits are legitimately out of the reach of a taxing government. I don't know if there is such a vehicle though. Any draw/distribution you personally take is subject to income taxes.

    The crackdown recently has been targeted on monies deposited offshore, not declared, and then used to pay personal expenses, like through the use of a credit card. This is tax evasion. And when the IRS gets funding (which they don't have currently) to pursue these evaders, they will get jail time.

    If you don't want to go offshore, a tactic the Congress will inevitably disable by forcing US shareholders of offshore companies to declare thier share of profits, you should set up an S Corporation or LLC and deduct reasonable expenses, like office,equipment,data fees, advisory fees, business related travel, tax and accounting fees. A S corp's profits all flow to the shareholders and are not taxed at the corporate level, but are ordinary income. A traditional C corp is taxed at the corporate level and dividends and distributions are then taxed at the personal level and is better suited to a large enterprise.

    Why not pay the tax. Think of it as funding the war on terrorism (as well as the welfare mother with 9 kids and no husbands living across town from you)
    #18     Apr 12, 2002
  9. Babak


    How would you go about setting up a prime brokerage acct from offshore?
    #19     Apr 13, 2002
  10. Contact someone like SLK, ABN, Bear, etc., tell them what you are doing, they will want a minimum of $500K, more realistically, $1,500K, and you will be on your way. You might run into a 50% non-US source problem. Worst thing about it is your fees might be higher; they are used to hedge funds that care about soft dollars.
    #20     Apr 13, 2002