Prop k-1s and FEIE

Discussion in 'Professional Trading' started by trader59, May 21, 2009.

  1. trader59


    Does anyone know if the k-1 income from a prop firm qualifies for Foreign Earned Income Exemption, or it does not since it is a partnership distribution of a USA-based LLC?
  2. this is a grey area, but have gotten some counsel in the past that said as long as you can prove income was generated from invesmtent/trading, it should be good.

    might want to talk to green, he was working with a law firm about an opinion they were writing up for a decent offshore firm that were going through an onshore k1 setup. from what i hear, they were given the green-light.
  3. trader59


    Next question is if they consider it earned income or simply capital gains.
    If they consider it earned income from stocks (unlikely), then it would be tax free and Social Security tax free.Having your cake and eating it too.
  4. if u stay outside of the US for 330 days then it should, im also interested in this topic, anyone else in the know?
  5. CET


    Publications 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, 514, Foreign Tax Credit for Individuals, and 901, U.S. Tax Treaties, discuss in detail the treatment of your foreign income, the foreign tax credit, and the general tax treaty benefits available to you.

    The above link/info may help as a starting point.
  6. i read it, but cant figure out if indepedent k-1 qualifies, i dont think it does. one has to be employed and paid out by a foreign firm.