My new CPA tells me that owning a seat means I should be paying ordinary income rates

[MollieJp]

Maybe I should find a new CPA? This seems ridiculous to me...

He says since I own a seat and have very large gains every year it will be hard to avoid professional status and therefore as a self-employed person I am required to pay ordinary income rates, even on Section 1256 contracts!

He also says FICA/SE tax is always linked to ordinary income rates, and NIIT to investment income. Therefore, there is no scenario where people own a seat and pay SE tax on section 1256 contracts without also paying ordinary income rates.

I am starting to think he is clueless, but maybe there's a chance I'm wrong?

 

[Sekiyo]

https://chatgpt.com/share/03a7abf7-6ffd-4bbe-b426-cbc83c4bec02

 

[ZBZB]

Ask https://greentradertax.com/

 

[SunTrader]

If you have large gains every year you would have your answer by now.

 

[savoir]

Maybe I should find a new CPA? This seems ridiculous to me...

He says since I own a seat and have very large gains every year it will be hard to avoid professional status and therefore as a self-employed person I am required to pay ordinary income rates, even on Section 1256 contracts!

He also says FICA/SE tax is always linked to ordinary income rates, and NIIT to investment income. Therefore, there is no scenario where people own a seat and pay SE tax on section 1256 contracts without also paying ordinary income rates.

I am starting to think he is clueless, but maybe there's a chance I'm wrong?

Your CPA is apparently incompetent. Therefore, your incredulousness is justified.

The correct result is 60/40 treatment under section 1256(a)(3) and SE tax under section 1402(i).

 

[Robert Morse]

When I was an option market maker and had my own BD, all my income was 60/40 however I was not except from self employment tax. I do not think owning or leasing a membership on the CME has the same requirement but green trader tax would be a good resource.

 

[FSU]

I will also suggest a need for a new accountant.

 

[mervyn]

your accountant is correct in a big picture, se tax has nothing to do with income tax, they are different. you must pay both se tax and income tax, assuming you are taxing as disregarded entity or as individual. 1256 rolls into schedule d.

green will tell you to form a s corp and take salary, not much savings on tax.

 

[Cabin1111]

Before/if you let him go...Ask him how he would defer your taxes in different ways.

He may be wrong on one issue, but a gold mine on how to keep the government from grabbing the money quickly...

I caught my CPA making major mistakes on investment...But was good/OK in other areas.

 

[Business2122]

Maybe I should find a new CPA? This seems ridiculous to me...

He says since I own a seat and have very large gains every year it will be hard to avoid professional status and therefore as a self-employed person I am required to pay ordinary income rates, even on Section 1256 contracts!

He also says FICA/SE tax is always linked to ordinary income rates, and NIIT to investment income. Therefore, there is no scenario where people own a seat and pay SE tax on section 1256 contracts without also paying ordinary income rates.

I am starting to think he is clueless, but maybe there's a chance I'm wrong?

If you have a seat and accumulate those gains passively then ordinary income doesn’t apply, but if they did you can offset the tax completely with NOLs