Gross receipts tax to state?

[Aisone]

In addition, I've always been directed to fill out a Form 4797, which is a "Sales of Business Property" form, and to include the sum of all net sales.

 

[jeb9999]

I've always been told taxes for a trader are considered "ordinary income", (thus not subject to capital gains).
QUOTE]

Told by whom?

You have it baxkwards.

Trader income is capital income and is not ordinary income.

 

[jeb9999]

In addition, I've always been directed to fill out a Form 4797, which is a "Sales of Business Property" form, and to include the sum of all net sales.

Who directed you to fill out Form 4797 ?

Trading involves the buying and selling of capital assets.

Equity and equity option trading is reported on Schedule D and futures and futures options and all other Section 1256 contracts are reported on Form 6781 ( which flows to Schedule D).

Traders have zero income to report on a Schedule C.

I am amazed the IRS has never come after you for improperly reporting your 1099B trading.

 

[Aisone]

I've always been told taxes for a trader are considered "ordinary income", (thus not subject to capital gains).
QUOTE]

Told by whom?

You have it baxkwards.

Trader income is capital income and is not ordinary income.

I might have misremembered. Pub 550 refers to it as "ordinary gains", as opposed to ordinary income.

However I've never heard of "capital income." What is the IRS definition of 'capital income'?

 

[sprstpd]

http://www.greencompany.com/EducationCenter/GTTRecSelfEmployTax.shtml

 

[Aisone]

Who directed you to fill out Form 4797 ?

Trading involves the buying and selling of capital assets.

Equity and equity option trading is reported on Schedule D and futures and futures options and all other Section 1256 contracts are reported on Form 6781 ( which flows to Schedule D).

Traders have zero income to report on a Schedule C.

I am amazed the IRS has never come after you for improperly reporting your 1099B trading.

My accountant and it's also stated in Irs Pub 550: Special Rules for Traders in Securities under section Mark-to-market election made.

 

[sprstpd]

Form 4797 is used for mark-to-market accounting.

 

[Aisone]

Form 4797 is used for mark-to-market accounting.

Indeed, which I assume most short-term traders in stocks elect to use.

Mark-to-market election made.
If you made the mark-to-market election, you should report all gains and losses from trading as ordinary gains and losses in Part II of Form 4797, instead of as capital gains and losses on Form 8949 and Schedule D (Form 1040). In that case, securities held at the end of the year in your business as a trader are marked to market by treating them as if they were sold (and reacquired) for fair market value on the last business day of the year. But do not mark to market any securities you held for investment. Report sales from those securities on Form 8949 and Schedule D (Form 1040), as appropriate, not Form 4797. See the Instructions for Form 8949 and Instructions for Schedule D (Form 1040).

 

[sprstpd]

http://www.forbes.com/sites/greatsp...rofessional-traders-can-save-big-at-tax-time/

State tax rules for entities usually make exceptions for trading businesses, but that is not always apparent.

 

[tiddlywinks]

Trading income is not considered earned income. Does the gross receipts category still apply if the income derived is not earned income? That is the first avenue I would explore. Of course, it is possible I am not understanding the original question, but any tax that is based on the cumulative property sold without considering cost basis would put every active trader out of business immediately.

NM isn't mentioned much as a hotbed of activity for hedge or other money mgmt businesses. Maybe you hit on the reason! :eek:

BTW: the earned/unearned income is a good argument. The problem with it, based on what I am understanding thus far of this situation, is the OP files his trading as a sched C business. Now then, there is no officially approved or sanctioned workaround (for the IRS, which is not the state) for turning unearned income (trading profits) into earned income using a schedule C. Make no mistake, there are workarounds, but none of them are guaranteed to work in all cases. So I'm thinking the state is eying that Sched C income as normal earned income, and having little to no knowledge of the trading "business" they want their share of the gross receipts, which CAN include the sale of tangible personal property (according to the state website), which CAN be interpreted to be the instruments traded by the business.