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My experience is that accountants don't know the fine points of the trader
status concept. Even accountants that deal with a number of traders.
..Mark
At 07:01 PM 3/10/99 -0600, you wrote:
>I missed the name of the book.
>
>If you are not contributing to a pension fund of any kind (ira, keogh, 401k
>or whatever) you can set up a keogh for yourself. Depending on your age,
>you might be able to contribute to a keogh a larger amount than the 30k or
>35k that the usual IRS publications mention. The way it works, is say you
>are 50 and you want to retire at 65 with a certain pension, an actuary will
>determine how much you need to contribute each year to meet this. The
>hooker is that until recently the IRS rules required that you get a
>qualified actuary to prepare your annual report, and these were not cheap.
>I was told that the IRS rules were changed in 1997 and you can now do the
>actuary report yourself. Better check on this as I am not sure.
>
>If you need advice on this, do not go to the IRS, get a knowledgeable
>accountant or pension plan advisor. This will cost you but it will be
>better than the incorrect information that you are likely to get from the
>IRS people. Some brokers will provide you with an approved (by the IRS)
>plan provided you trade with them. If you decide to go to another broker,
>you can take the plan with you.
>
>You can deduct your investment operating costs like software, reference
>books, advisory services, telephone etc on Sch D. I am going thru an IRS
>audit and they accepted investment expenses for which I had adequate
>documentation. After some discussion they reluctantly accepted credit card
>statements and checks as providing documentation.
>
>Recently someone posted to this thread that they use Sch C and Sch D for
>their investment expenses and income. They said that they are audited
>every year, but here the key is to have GOOD records and receipts for
>everything relevant.
>
>Another suggestion is to incorporate your trading activities. Here again
>you will need competent tax and legal advice.
>
>You should buy or borrow the complete IRS rules (2 vols). You can buy it
>at a legal bookstore, order it from the Government Printing Office, order
>it from the Commerce Clearing House (they are in Chicago), or look at it in
>a law library.
>
>Hope this helps.
>
>Lionel
>
>
>-----Original Message-----
>From: Chuck Wemlinger <yeti@xxxxxxxxxxxxxxx>
>To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>Date: Wednesday, March 10, 1999 6:21 PM
>Subject: Re: Using "Trader" Status for Income Taxes
>
>
>>Hi Bill,
>>
>>What did you think of the book? I went to Amazon to check it out and was
>>suprised to see it was about $80. The readers reviews were interesting.
>>Most felt it did not dedicate enough coverage the subject of taxes as it
>>applies to the Trader as the title would indicate. Here is one of the
>more
>>interesting reviews:
>>
>>"This book gives a unique point of view so, it does not duplicate what you
>>can get in other tax books. It advocates you try to qualify for 'Trader
>>Status', and there are several Supreme Court tax cases concerning this
>>difficult to qualify status. This status means that your TRADE as a
>serious
>>business, hold postions for generally less than a month. All your expenses
>>become fully deductable on Schedule C, HOWEVER you lose Capital Gain
>>treatment AND must pay Social Security and Medicare taxes on your Self
>>Employment income but you can set up a pension plan and/or SEP IRA. I
>think
>>there is too great a danger of a nasty IRS audit, and not enough taxes
>>saved. A difficult route for a Futures Trader, nearly impossible for a
>Stock
>>trader except for some SOES traders."
>>
>>My understanding of the situation is that if you show income from another
>>source like a job or business, then there's little chance that you can
>>convince the IRS that you're in the business of trading (even if you trade
>>commodities and hold for short periods). Therefore while you show
>>gains/losses on Schedule D, you cannot deduct or expense any of your
>>operating costs like telephone, computers, software, etc.
>>
>>If you're not certified or licensed and trade only your own commodities
>>account as your primary source of income are you only self-employed or are
>>you in the "business of trading", and can expense or amortize your various
>>expenses? I guess it's up to the individual to decide it they want to
>risk
>>a potential test by the IRS.
>>
>>-----Original Message-----
>>From: Bill Coward <wrcoward@xxxxxxxxx>
>>To: metastock@xxxxxxxxxxxxx <metastock@xxxxxxxxxxxxx>
>>Date: Tuesday, March 09, 1999 7:37 PM
>>Subject: Re: Using "Trader" Status for Income Taxes
>>
>>
>>>Lou,
>>>
>>>According to Ted Tesser, author of TRADER'S TAX SURVIVAL GUIDE, and a CPA
>>>and tax accountant specializing in investment taxation, trading activity
>is
>>>considered to be capital gain income (or loss) and should be reported on
>>>Schedule D. It should not be reported on Schedule C, the form for
>>>reporting earned income from a business or trade, nor should it be
>reported
>>>on Schedule SE, the form for calculating self-employment tax on earned
>>>income from a business or trade. He goes on to say that, since the
>income
>>>is not earned, no retirement plan contribution should be made against it.
>>>
>>>Thanks for your feedback.
>>>
>>>Bill
>>>
>>>----------
>>>> From: Lou Baker <louab@xxxxxxxxxxxxx>
>>>> To: metastock@xxxxxxxxxxxxx
>>>> Subject: Re: Using "Trader" Status for Income Taxes
>>>> Date: Tuesday, March 09, 1999 12:40 PM
>>>>
>>>> Bill, although not a direct answer to your question, look carefully at
>>>the
>>>> self-employment tax you may be liable to pay if you claim a trade or
>>>> business, unless you max out on other earned income, of course. Lou
>>>>
>>>>
>>>
>>
>>
>
>
>
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