SMLLC 1256 contract taxation

Discussion in 'Taxes and Accounting' started by ptunic, Dec 17, 2007.

  1. ptunic

    ptunic

    In January 2007, I created a SMLLC (single-member LLC) for purposes of building a track record, vested with a small amount of my personal funds. It is likely to remain just a single member entity (no partners) for at least a few more years.

    Just to reduce the pain of tax preparation this year, my current plan is to keep its default classification as that of a "disregarded entity", which means even though it has limited liability for legal purposes, for tax purposes it is treat as a sole proprietorship. My understanding is this being the case, I don't need to fill out the LLC federal taxation forms or Schedule K/ K-1 partnership forms.

    Instead, I believe I can list expenses on Schedule C of my 1040. I wanted to verify that for income, which is entirely of the form of 1256 contract profit/loss, I can use Form 6781 which links in with Schedule D. On Schedule C, I would list income as 0, as all the income is through capital gains/losses, and I would just list expenses.

    I just wanted to double check that this is indeed the cases, and that I'm not supposed to list the income on Schedule C instead, which would have the effect of converting investment income to earned income, subject to higher tax rates + self-employment taxes. I'm pretty sure using Form 6781 and Schedule D is the way to do it, but was a little worried since all the literature I can find on this mentions using Schedule C, and doesn't refer to Schedule D.

    Thanks in advance!