Tax issue

I'm a fairly new trading and this is my first year of really manking money. Your help would really be appreciated!

I went to see my accountant today and gave him my tax information. I'll use some hypothetical numbers.

From my first firm at which I traded for myself, I made 100,000.

Then I opened an account at Lightspeed in which I lost 25,000.

I saw the accountant and he told me I would get taxed for 97,000 not 75,000 as I had anticipated.

This was because I could only claim 3,000 of the 25,000 as a capital loss.

I was under the assumption that it was all ordinary income and that I would get taxed on my net...which was 75,000.

Accounting isn't my strong suit and don't know where to turn. I'm hoping someone could shed some light on this for me.

John

 

I don't believe that is correct, but I only trade through tax privileged accounts, so I'm not 100%.

Here is a pretty neat capital gains calculator that I found, and it seems to indicate that your original thought was correct.......

http://www.smartmoney.com/Personal-Finance/Taxes/The-SmartMoneycom-Capital-Gains-Guide-9530/

 

What was your status at the trading firm? Were you an employee? K-1 partner? Independent Contractor? This is probably the issue that is getting you.

 

Get a new accountant unless you happened to have made 100,000 in short term trades and lost 25,000 in long term trades. If they are all short term gains and losses, you should be reporting 75,000 in total profit.

 

file as a M2M trader and you can take the loss on the whole lightspeed account and only pay tax on 75k which was your profit. If you dont file M2M then you will be subject to the ordinary tax loss of 3k per year. Go to traderstatus.com to read more about it. I suggest you get a better accountant. I use Colin Cody from the previous website and have for 8 years now.

 

You guys are passing judgment without all the information. If he were payed as an employee at the trading firm it may be considered "earning income," in which case his accountant is right. Only 3k will be deductible on his return but at least he can deduct 3k per year for the next 8 years and 1k in the 9th. If he were paid through a K-1 or a 1099 then it may change his tax case completely.

And filing M2M status with the IRS can be a complete can of worms, not to mention that it is difficult to prove. It sounds as though the OP would have little trouble proving it though.

 

I received a 1099-MISC. from the initial firm. I didn't have to put anything up and gave them a 10% cut.

Thanks for your help

 

The,

it was a 1099.

He advised that I can set up some sort of partnership with my wife which will allow me to pay on 75K.

Is he right about this, or should I go to another accountant?

Thanks!

 

MTM is no good. He'd have had to apply last year.

 

Apparently my accountant said I would still be able to do this for this year.

I'm just wondering, given the circumstances, is his assesment correct?