taxes and finding successful traders

Discussion in 'Taxes and Accounting' started by vk60546, Oct 28, 2010.

  1. vk60546


    two questions:

    1. How do taxes in the US work? Lets say (very hypothetically speaking) that I've started out with 10K and earned 40K this year, making my net profit 30K for this year. If I decide to keep the money (all stocks) in my account, will I be required to report this as income or does it count as income only when I transfer the money from my brokerage account to my bank account?

    1 a - if this is a profit from stocks, is this treated as a short term capital gains and is it then taxed the same as additional income from my job?

    2. Lets say I wanted to find a successful trader to trade my 10K for say, 20% annual return.

    2a - is this an unreasonable request? I'd think that a big risk should demand a bigger return.
    2b - how to find a trader willing to trade my ca$h and how to make sure they are not a scammer? Probably need to ask their annual income statements, eh? But how can they give that info to me and keep their privacy?
  2. Your accountant will explain the taxes to you and your lawyer will handle assuring that your POA will be functional for your passive investing or trading.

  3. A tax auditor went to a home for a meeting. The door was opend by a girl of ten. Seeing who it was she called up to her mother, "Ma, its the tax man"

    The mother called in, "Give him a chair"

    The girl replied, "If that's not enough should I give him the couch and the table too?"
  4. For 2. - this is pretty much a fantasy. Longterm, the stock index outperforms most investors. And how much do you think of your 10K and 20% do you think you would have to fork over to a trader who could achieve this LONG term, and how would you know beforehand the person had any clue about successful, reasonable risk trading?

    Warning: do NOT use Jack for investment ideas. if you choose to do so anyway, you can come back to this thread later to weep and wail for having gotten involved...
  5. To be more explicit about the relationship of a POA and a person's goals.

    Certainly your lawyer can arrange the POA to satisfy the following:

    1. Guaranteeing all losses will be covered at a specific annual point in time.

    2. Guaranteeing that your anual goals will be achieved.

    3. Giving you control of what is paid by you from the profits to the person who has the POA to trade your account(s).

    To whom would this arrangement appeal?

    This is a very appealing arrangement to any skilled trader/investor. Point by point:

    1. Losses are not a problem for skilled traders and investors.

    2. Your annual goals compared to the market's offer are low relative to any trading approach that is systematic and/or applies to any amount of capital or liquidity of any tradable market. your broker will have the account(s).

    3. You have a tax problem that is still not evident to you. Before ANY of the surplus profits from your account(s) are to be paid to anyone, you must fully resolve the tax consequences of the profits that would be occurring by a trader of the ilk to whom this deal appeals.


    This deal appeals primarily because of the compounding consequences of letting money ride in account(s). The tax consequences of compounding are much more significant than the return to the "offerer". Even after taxes are netted out, there will be a great deal of pressure on the "offerer" to not pay what is due the trader simply because of human nature.

    We all get the humor of a guy like Joe. He is "priceless" in his advice.

    Trading is an adult sport and making money is related to the STANDARD of the market's offer and nothing else. For Joe even seeing the market's offering is a fantacy. Why wouldn't it be.

    There are many many ways to make money in markets. It is a standard practice of some skilled traders to abide by NFA code to remain "unprofessional". The limit is monitored by IB's as well as regulators. Running at the limits is often done by such traders. Why? the reason to to avoid several things. listing them is a routine thing for these types of traders. You can google past commentary.

    What we have here is two types of "unprofessional" Joe is one type and I am an experienced person in all of the above for the other type.

    Why did I trade for others. I did it, without compensation, for one reason: To allow those I traded for to contribute 20% of their professional time to individuals and families who could not ordinarily afford their services. The effect was that I had three full time professional employees who worked to help other and who did not charge fees for helping others.

    Poor families getting repeated free help over the course of difficult problems is NOT a fantacy for those families who received such help.

    What did it cost me as a trader? Nothing whatsoever. I was making all those those decisions anyway.

    The only people I have written checks to were people who I was mentoring and they did have personal losses they encountered in learning to trade their accounts. Over this whole period, I have written less than 100,000 dollars of small checks. As they became profitable my checks were not refundable.

    Joe asks a question that puzzles him. The answer is crystal clear and any skilled trader who takes on POA's knows the answer. Joe is NOT one of those people and he has proven this fact to you and me.

    The answer is word of mouth commonly expressed as WOM. Professional belong to organizations. they share their work habits. All professions have a component that is called pro bono. Pro bono only extends so far. And there are always more demands than pro bono available. Professional organizations do give awards to those who support the work of their professions. It is fun to be on the other end of this recognition.

    Personally, I'm getting tired of Joe Paterno, his types and what they stand for. I'm answering Joe's questions because he needs to learn what is what. The best way for him to do that is to just ask questions in the areas in which he will never have any experiences. He will always be in fantacyland.
  6. 1. You still pay taxes
    1a. yes
    2&2a. very unlikely. First, good trader doesn't need your 10k. with a bigger amount, they might. but then legal issues come into play. If someone accepts this request, highly likely they are losing traders in desperate need of money, and you can kiss your money good bye. there's a reason funds(with 5-10% ROI) charge your NAV and other fees.
    2b. very hard. best done by connections. It'll be hard to find a reliable trader who doesn't charge upfront. if he/she doesn't, then you'll doubt his/her credibility. It's the way human psychology works i guess.
  7. who wouldn't want to turn 10k into 62k in 10 years..........over 200k in 20 years. Hell yeah, I can put away 10k now for over 2M by the time I retire......
  8. bone

    bone ET Sponsor

    Please ask your accountant about reporting realized versus unrealized capital gains.

    Extensive info at
  9. In the US, you are taxed on your gain in the year where you realized the profits (i.e. the year you sold your stocks). Beware of the Wash Sales rule. Short-term gains (less than 1 year) are taxed at the same rate as your ordinary income (higher rate). Long-term gains (longer than 1 year) are taxed at a more favorable rate.

    If you are a foreign individual or entity trading the US stocks... then I don't know. I guess you are bounded by your own country's tax codes.

    RE: 1 a - if this is a profit from stocks, is this treated as a short term capital gains and is it then taxed the same as additional income from my job?

    Short-term capital gains are reported in Schedule D and yes they are taxed at the same rate as your ordinary income (e.g. wages/salaries). If you have a sizable gain one year, you may trigger Alternative Minimum Tax too.

    As on your other questions... I think $10k is too small for handing to other professional traders to trade the money for you. And 20% per year is overly optimistic.
  10. GG1972


    Thread ruined

    #10     Oct 29, 2010