Yes, I agree a tele conference is warranted, just to confirm the LLC set up.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Just started out, needing input!
- Thread starter Ifitis
- Start date
Yes, I agree a tele conference is warranted, just to confirm the LLC set up.
Hm, not sure, but my understanding is that this will not offer any meaningful protection as far as trading is concerned.Protection and potential protection of assets was a go
I’ve been a mtm trader since 1999. I saw no advantage of a llc as far as writing expenses off . As far as turbo tax or whatever that has no relevance as I’ve been doing 1 line accounting since 1999. You trade in your designated day trading accounts . Have your balance on Jan 1st and your balance on dec 31st minus all withdrawals .Thats your profit for the yr .i started off using Green for a few yrs and then started doing myself . To pay $1500 a yr for something easy to do is crazy . If you feel better using a local CPA the buy Greens sample returns and give it to them . What you do need is the 2-3 pages of notes explaining that are attached to the return explaining what a mtm trader is and explaining some other things
Thanks for the input. "Have your balance on Jan 1st and your balance on dec 31st minus all withdrawals", do you mean plus all withdrawals, assuming you mean withdrawals from the trading account. Would it not be profit?
Are Green's Sample returns contained in https://www.tradersaccounting.com/2020/02/13/four-tax-deductions-for-traders/ ?
So, you attach 2-3 pages of printed notes to your return, explaining MTM? This sounds like a good idea. I assume explaining how MTM makes all gains and losses ordinary, and wash sales do not apply?
Just making sure i am understanding you correctly. many Thanks!
2 things worth noting...
1) A single-member LLC, in the eyes of IRS is no different than a sole proprietorship. This means using a Schedule C, which is acceptable, but adds "complications" as Schedule C for a trading business contains ONLY expense, not capital gains or losses. Verbose footnotes would be needed and necessary.
2) Depending on what you trade, MTM may not be desirable. The MTM election allows for application to equities AND/OR section 1256 instruments. Electing MTM for 1256 instruments may eliminate the preferential 60/40 tax treatment.
Buy a copy of Greens book before you go too deep, and away from your intent.
https://greentradertax.com/shop-guides/greens-trader-tax-guide/
1) A single-member LLC, in the eyes of IRS is no different than a sole proprietorship. This means using a Schedule C, which is acceptable, but adds "complications" as Schedule C for a trading business contains ONLY expense, not capital gains or losses. Verbose footnotes would be needed and necessary.
2) Depending on what you trade, MTM may not be desirable. The MTM election allows for application to equities AND/OR section 1256 instruments. Electing MTM for 1256 instruments may eliminate the preferential 60/40 tax treatment.
Buy a copy of Greens book before you go too deep, and away from your intent.
https://greentradertax.com/shop-guides/greens-trader-tax-guide/
Thanks for the input. "Have your balance on Jan 1st and your balance on dec 31st minus all withdrawals", do you mean plus all withdrawals, assuming you mean withdrawals from the trading account. Would it not be profit?
Are Green's Sample returns contained in https://www.tradersaccounting.com/2020/02/13/four-tax-deductions-for-traders/ ?
So, you attach 2-3 pages of printed notes to your return, explaining MTM? This sounds like a good idea. I assume explaining how MTM makes all gains and losses ordinary, and wash sales do not apply?
Just making sure i am understanding you correctly. many Thanks!
You can buy a sample of Green's tax returns which will have the 2-3 pages. It explains you've elected mtm trading with the irs and your a short term trader and you meet the rules for a mtm trader. Your trading profits are exempt from ss taxes etc. As far as if you want Long term investments or or you trade 1256 futures contracts ( 60/40) tax treatment you must have separate accounts for those and not comingle . All mtm means is at year end all the stock in your account is Marked to marketed at the dec 31st price for tax purposes . Say your holding 5 stocks from dec 31st to the new year all your do is take your dec 31st account balance . Example of 1 line accounting . Start yr with $300k. Thru out the year you took $150k of withdrawals out. end of year you have $400k in there . You must add the $150k back to your end of yr balance of $400k. So if you had pulled no money out you'd have a balance of $550k. So your net profit is
$550k(yr end balance ) vs you started the yr with $300k . So your profit is $250k. Now your must also minus out,Dividends paid or interest made on the account(those are taxed on
separate forms . If you don't you'll be doubled taxed on them . So lets say your brokerage accounts says you sold $5 mil of stocks. On form 4797 you put 1 line accounting. Totals sales ($5 million) . Total cost ( $4,750,0000) for a total profit of $250k. That $250k goes on your schedule C . The $250k minus all your sch C exp's is your total profit you pay income tax at your tax rate.
1) Since I have elected MTM accounting for the LLC by attaching a Resolution electing this, I can report as ordinary gains and losses, not capital, this is my understanding. One could not do this if they had not selected MTM I am told.2 things worth noting...
1) A single-member LLC, in the eyes of IRS is no different than a sole proprietorship. This means using a Schedule C, which is acceptable, but adds "complications" as Schedule C for a trading business contains ONLY expense, not capital gains or losses. Verbose footnotes would be needed and necessary.
2) Depending on what you trade, MTM may not be desirable. The MTM election allows for application to equities AND/OR section 1256 instruments. Electing MTM for 1256 instruments may eliminate the preferential 60/40 tax treatment.
Buy a copy of Greens book before you go too deep, and away from your intent.
https://greentradertax.com/shop-guides/greens-trader-tax-guide/
I did a consult with a friend earlier and they stated I should be able to use Quickbooks Home and Office as it has a feature to select 475 (MTM). this apparently will clear out washes and treat them as ordinary income, and is self editable. He was the one that suggested I could just treat the stocks as inventory in the software, inputting the stocks as purchases, with quantity and price, then the sales quantity and price. I need to verify that. This would be inported into Quicken or Quickbooks, both have inventory tracking, just to make it easy.
2) I bought the book a little bit ago. I trade only U.S. Stock Equities, no options or futures.
I understand. Thanks!You can buy a sample of Green's tax returns which will have the 2-3 pages. It explains you've elected mtm trading with the irs and your a short term trader and you meet the rules for a mtm trader. Your trading profits are exempt from ss taxes etc. As far as if you want Long term investments or or you trade 1256 futures contracts ( 60/40) tax treatment you must have separate accounts for those and not comingle . All mtm means is at year end all the stock in your account is Marked to marketed at the dec 31st price for tax purposes . Say your holding 5 stocks from dec 31st to the new year all your do is take your dec 31st account balance . Example of 1 line accounting . Start yr with $300k. Thru out the year you took $150k of withdrawals out. end of year you have $400k in there . You must add the $150k back to your end of yr balance of $400k. So if you had pulled no money out you'd have a balance of $550k. So your net profit is
$550k(yr end balance ) vs you started the yr with $300k . So your profit is $250k. Now your must also minus out,Dividends paid or interest made on the account(those are taxed on
separate forms . If you don't you'll be doubled taxed on them . So lets say your brokerage accounts says you sold $5 mil of stocks. On form 4797 you put 1 line accounting. Totals sales ($5 million) . Total cost ( $4,750,0000) for a total profit of $250k. That $250k goes on your schedule C . The $250k minus all your sch C exp's is your total profit you pay income tax at your tax rate.
I have elected MTM accounting for the LLC
So long as you qualify for TTS (Trader Tax Status),
and you timely file IRS Form 3115 for change of accounting method.
Qualification for TTS is a requirement. Otherwise anybody who trades just a little could qualify for treating capital gain/loss as ordinary business gain/loss.
Not to lose sight of your actual intent... be sure you learn about "pierce the corporate veil"... THAT is what you need to concern yourself with.
Last edited:
So long as you qualify for TTS (Trader Tax Status),
and you timely file IRS Form 3115 for change of accounting method.
Qualification for TTS is a requirement. Otherwise anybody who trades just a little could qualify for treating capital gain/loss as ordinary business gain/loss.
Not to lose sight of your actual intent... be sure you learn about "pierce the corporate veil"... THAT is what you need to concern yourself with.
I should have no problem qualifying for TTS, based the IRS definition, and the Court Cases i have reviewed. Qualifying for TTS seems to be easier, based on what I have read, and I am reading now at Green's, if one trades through an entity, like an LLC, S Corp, etc.
Good point on the 3115. I was confused by the filing requirements for the IRS Form 3115 for days a few weeks back, but finally found some answers. It must be filed at year end, and has some specific requirements like IIRC, copying the IRS main office. I will be using a CPA for that I am thinking as that form is complex, and must be filed properly. The IRS could make things easier IMO, but I know they won't. Having to file a "Statement" electing 475 MTM when filing the prior years taxes or via an extension form, before the filing deadline of the previous tax year, then filing a form 3115 at year end, with a copy to the IRS National Office seems intentionally confusing to me.
Thanks!