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let the corp. pay as many expenses for you as practical health life ins,
education cost for all employees and their dependents, office expense, travel,
accounting legal corp vacation property ext. this is the tip of the
iceberg, do some homework. Then take a salary so you can fund a retirement
program that of course the corp will match your contributions, then hire the
kids for several thousand a year to file papers so that they can fund retirement
accounts. All of this is expense to the corporation and is deductible. If you
still have taxable income buy or lease cars and insurance on them. If you still
have income stop trading in that account and trade in your retirement accounts.
Never pay a div. as it is not an expense for the corp. Also you withhold profits
for future business expense. If you do this there are limits that if reached can
trigger being classified as a holding company, but the limits are high and you
can always let the corp buy a rental property (maybe on the beach or in the
mountains). Sorry made these comments before reading the orig email. Regarding
the partnership structure it does work, is complicated and for me I found
it easier to just trade in the corp and expense and then trade in my retirement
accounts. In several more years I will be able to withdraw from the Roth Ira's
in substantially equal payments thereby avoiding the penalties even thou I'm
only 45
<FONT face=Tahoma
size=2>-----Original Message-----From: chrischeatham
[mailto:chrischeatham@xxxxxxxxx]Sent: Saturday, January 05, 2002
12:54 PMTo: realtraders@xxxxxxxxxxxxxxxSubject: [RT] Re:
GEN: TAX ISSUES....The unanswered question in what
you posted is how you get the cash out of the corp. You pay less tax now,
but to get the $$ out you have to do it as a dividend, which you pay tax
on again at ord. income rates. I guess if you think your rate
is going down someday, you could save the div. and distribute later, but
15% added tax to defer income??Generally, the easier way I know of
it being done is to claim trader status and deduct all exp as business
expense, but claim cap gains as cap gains at reduced rate. So
net bus income is always negative...no self employment tax...and you get
the benefit of lower cap gain rates. cap gains are not subject to
self employment tax.Chris--- In realtraders@xxxx, "charles
meyer" <chmeyer@xxxx> wrote:> Accounting, Tax Preparation &
Tax Strategies for Active Traders.Group:> > I'd like to hear
any comments or feedback on this entity concept? I like to hear all
sides> of an issue but here are some comments from one of my
correspondents on this subject.> He claims that the entity thing is
much riskier and more complex thatn the information> below suggests
and which he puts in the same camp with 'offshore tax savings' which
could> also result in jail time for some folks. He doubts that
one could gain the advantages (which> could be disadvantages
because of the SE tax) of trader status by just using a different entity;
especially one in which everything passes through to your return.
Maybe this is pretty darned good advice, no? Anyway, thanks for any
additional comments.> > Chas> > > >
> >
Click above for more information
>
>
>
>
What have you deducted
today?>
>
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>
> You
Trade...We'll do the Rest May 26, 2001 8:09 AM
PDT>
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> Put your
capital in an entity!!! TradersAccounting.com advises clients on the most
advantageous entity structure for your trading activities. If you are an
investor or part-time trader, and are frustrated with the tax code's
restriction on deducting investor expenses, here is your answer.>
> (1)
Create a limited partnership in your state of choice. You can register it
in your home state, or if you prefer, you can use a state such as Nevada
that does not have a state corporate income tax. After completing the IRS
SS-4 form, you will be issued an Employer Identification Number (EIN).
That is the identifying number that the IRS uses for your new business.
The next step is to transfer your brokerage account, or some portion of
it, out of your personal social security number, and into the new
EIN.>
> (2) At
this point, business can begin and all "ordinary and necessary" business
expenses incurred in your business of money management are 100%
deductible. Of course, meal and entertainment expenses are subject to a
50% limit. It is very exciting to offset trading gains with expenses you
are currently incurring, such as computers, training, subscriptions, meals
with fellow traders, and internet access.>
> (3) A
limited partnership is a "pass-through" tax entity. The partnership itself
does not pay taxes at the entity level. Rather, the taxes are paid by the
individual partners on their respective tax returns based on their
percentage of ownership.>
> (4) If
you are in a high tax bracket, you want to lower the income reported on
your personal income tax return. In such a case, you could set up a
C-corporation and have it act as the general partner of your limited
partnership. The general partner could own a significant portion of your
limited partnership, and hence, be responsible for a significant portion
of the tax liability.>
> (5) The
corporation is a taxable entity. If the corporation owns 40% of your
limited partnership, and the limited partnership earns $100,000, the
corporation would be responsible for $40,000 in taxable income. That
currently would be taxed at the lowest corporate rate of 15%. Compare that
scenario to not having a corporate general partner and having the $40,000
added to your 31% individual tax bracket.>
> (6) The
corporation and limited partnership strategy is the most tax effective way
to run your trading business. We do not recommend that anyone file as a
"trader" on their personal return. The chances of audit are too high, and
the criteria to qualify are too steep. The safest and most effective way
to manage your trading capital is to place it in a limited partnership,
with a managing general partner that can either be a corporation or
something else, depending on your circumstances.> > >
> Learn
more: TRADER STATUS>
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more: TAX REDUCTION PLANNING>
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more: ACCOUNTING AND TAX PREPARATION>
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