Professional or Non-Professional Subscriber for Exchange Data Fees

[Tim Smith]

Not to mention that at one point in this thread you were saying an individual trader as a sole proprietor was a "professional", but now you are saying that trader is a "non-professional"

Ok, I promised not to post any more on here, but I have just for the above.

That is absolute rubbish. My position has been quite clear and exactly the same from my very first post on this thread.

Please don't try to make out some story that I'm now backtracking or whatever.

I have been consistently saying the same thing since my first post. I have only been spending the last god knows how many posts re-wording my post to try to make it clearer for people who didn't understand my first post. But the content is EXACTLY THE SAME, I have just been using different words to say EXACTLY THE SAME THING.

I'm done for good with this thread.

 

[dealmaker]

Yes but it is possible to be straddling that activity level the whole year. Then you would not know until year's end if you could be classified as "trader" in the eyes of the IRS.

I have traded at 2 different prop firms for 7 years and known tens of people who were full time traders never met anyone who were even close. Given, there are 252 trading days a year, that's 2.85 trades per day.

ps keep in mind the metric used to be 1000 trades per year...

 

[sprstpd]

Ok, I promised not to post any more on here, but I have just for the above.

That is absolute rubbish. My position has been quite clear and exactly the same from my very first post on this thread.

Please don't try to make out some story that I'm now backtracking or whatever.

I have been consistently saying the same thing since my first post. I have only been spending the last god knows how many posts re-wording my post to try to make it clearer for people who didn't understand my first post. But the content is EXACTLY THE SAME, I have just been using different words to say EXACTLY THE SAME THING.

I'm done for good with this thread.

I don't want you (Tim Smith) to be done with this thread even though it looks like you deleted all your old posts.

I'm not trying to be a smart-ass here. I think the whole issue here is that an individual trader can be a sole proprietor without incorporating according to the IRS tax code. One of your posts (which you have deleted) said that an individual, who signs up with their own name, is a "non-professional." But then later in the same post you said that a "sole proprietor" is a "professional." So what happens if an individual is a sole proprietor in the eyes of the IRS but does not incorporate. I.e., what happens if the individual is an individual and a sole proprietor simultaneously?

According to Robert Morse, he would advise claiming "non-professional" in this case and I agree. But it is not like I'm 100% sure this is true and it does not seem cut and dry to me.

 

[sprstpd]

I have traded at 2 different prop firms for 7 years and known tens of people who were full time traders never met anyone who were even close. Given, there are 252 trading days a year, that's 2.85 trades per day.

ps keep in mind the metric used to be 1000 trades per year...

I realize that the scenario I painted is very unlikely. However, the only reason I bring this up is that the same individual could have "trader status" one year according to the IRS and then the next year they might not (maybe their trading strategy changed during the year and their frequency of trading dramatically decreased). The fact is, it is possible that the individual does not know if they will achieve trader status in the eyes of the IRS at the beginning of the year.

Does the non-professional/professional qualification hinge upon whether this individual has trader status? I.e., because they qualify for trader status, they are then classified as a sole proprietorship?

The trader status qualification is a tax issue, and can be decided after the tax year is over. The non-professional/professional fees qualification is a real-time issue. For the sake of argument, let's assume that being a sole proprietor implies that you have to pay professional fees. And if you qualify for trader tax status, you are necessarily labeled a sole proprietor. Then, what I am saying is that whether you pay non-professional/professional fees hinges upon the exact moment that you can declare yourself to have trader tax status for that year.

And one more thing to put in the mix. There has been at least one IRS court case brought against a trader who claimed trader tax status but only traded regularly for a portion of the year. I believe the IRS won the court case so the individual could not claim trader tax status. Therefore, suppose an individual trades the first quarter of the year and thinks they will have trader tax status, but then they start losing money and decide to lay low while doing research the rest of the year. At what point do they pay professional fees? At what point do they revert back to non-professional fees?

The easiest way of interpreting this issue is that you pay professional fees if you are an entity or you are employed by a financial company. You pay non-professional fees if you are an individual with an account in your own name, even if the IRS treats you as if you are a sole proprietorship. I.e., the IRS classification does not count towards determining the professional/non-professional qualification.

 

[dealmaker]

I realize that the scenario I painted is very unlikely. However, the only reason I bring this up is that the same individual could have "trader status" one year according to the IRS and then the next year they might not (maybe their trading strategy changed during the year and their frequency of trading dramatically decreased). The fact is, it is possible that the individual does not know if they will achieve trader status in the eyes of the IRS at the beginning of the year.

Does the non-professional/professional qualification hinge upon whether this individual has trader status? I.e., because they qualify for trader status, they are then classified as a sole proprietorship?

The trader status qualification is a tax issue, and can be decided after the tax year is over. The non-professional/professional fees qualification is a real-time issue. For the sake of argument, let's assume that being a sole proprietor implies that you have to pay professional fees. And if you qualify for trader tax status, you are necessarily labeled a sole proprietor. Then, what I am saying is that whether you pay non-professional/professional fees hinges upon the exact moment that you can declare yourself to have trader tax status for that year.

And one more thing to put in the mix. There has been at least one IRS court case brought against a trader who claimed trader tax status but only traded regularly for a portion of the year. I believe the IRS won the court case so the individual could not claim trader tax status. Therefore, suppose an individual trades the first quarter of the year and thinks they will have trader tax status, but then they start losing money and decide to lay low while doing research the rest of the year. At what point do they pay professional fees? At what point do they revert back to non-professional fees?

The easiest way of interpreting this issue is that you pay professional fees if you are an entity or you are employed by a financial company. You pay non-professional fees if you are an individual with an account in your own name, even if the IRS treats you as if you are a sole proprietorship. I.e., the IRS classification does not count towards determining the professional/non-professional qualification.

1) Most IRS rules fall into a grey area where they are subject to interpretation, but 720 trades per year/ 31 days or less was a supreme court ruling thus it's black & white.

2) you are responding with a hypothetical, let's just stick to facts. Primary goal of any trader, trading for a living IE full-time, is to be profitable, beyond that is to qualify for trader tax status so you can take advantage of the benefits no ifs/ buts or maybes.

3) court case you referenced, that persons primary employment was not trading ( notice I did not call him/her trader).

 

[JSOP]

Thanks you so much guys for helping me making sense of this confusing issue but I just want to clarify one thing: I am in Canada so I can't claim Trader Tax status or MTM or whatever and I will be lucky if they treat my options profit as capital gains and my tax rate is 45% unless I incorporate which reduces my tax rate to 20+% I think that is of course IF I can really end up make that much money at the end the year; the year is still young.

Yeah I think you Americans got a good deal voting in Trump. I dunno why and how some of you would want to immigrate to Canada LOL. Our Liberal PM just implemented a new income tier of $250K for more taxation and increased taxation rate for income level above $100K. If I have a choice, I would LOVE to immigrate to USA if I can just for taxation. LOL

But this is NOT a question of tax issue. I just want to know in terms of the subscriber status for the exchange data fees, am I considered a "non-professional" or "professional" if I trade for myself with an account under my own name NOT under the corporation's name but incorporated for tax purposes.

 

[JSOP]

No.

The ONLY time you are a non-professional is if you are :
(a) A natural person
- AND -
(b) Not employed/contracted/working in the financial sector

If you do not meet BOTH criteria, then you are a "professional". Simple.

Yes but if I incorporate myself, am I employed by myself? Or am I only considered to be "professional" if employed by other corporations to trade on their behalf?

 

[Overnight]

Ok but I am a "natural person" who incorporated, so does that still make me a non-professional?? This is where I am confused at.

From the answers that I received, looks like I am still considered a "natural person" so I am still a non-professional? I just want to make sure.

At this point, why don't you call your local IRS field office and ask them? Or a CPA that has a handle on this section of the IRS code? You're just spinning in circles now.

Get the answers from the horses' mouths, as it were.

---------------
"Nearly every tax issue can now be resolved online or by phone from the convenience of your home or office."

https://www.irs.gov/help-resources/contact-your-local-irs-office
------------------

End of line.

 

[JSOP]

Right, I'm not going to endlessly repeat myself for people who can't be bothered to read.

One last time : A NATURAL PERSON IS JUST THAT.

Therefore if you are opening an account IN YOUR OWN PERSONAL NAME signing exchange-data IN YOUR OWN PERSONAL NAME then (as long as you are not otherwise involved in the financial sector) you are a "non-professional".

The minute you open account in a name other than your own name (business, corporation, trust, organization, institution, partnership,sole proprietorship... however you want to call it), then you are signing the paperwork as an authorised signatory of that other name (president, director or whatever you want to call yourself) ... then you are a "professional".

Sheesh... ITS NOT THAT DIFFICULT TO UNDERSTAND !!!!

I am not going to post any further on this thread. This is my last post.

Thank you.

 

[sprstpd]

At this point, why don't you call your local IRS field office and ask them? Or a CPA that has a handle on this section of the IRS code? You're just spinning in circles now.

Get the answers from the horses' mouths, as it were.

---------------
"Nearly every tax issue can now be resolved online or by phone from the convenience of your home or office."

https://www.irs.gov/help-resources/contact-your-local-irs-office
------------------

End of line.

They won't know because this isn't an IRS issue. It is an exchange fee issue.