Robert Green CPA, can we make a three person trading outfit qualify for "carry interest" status?

J

JesseJamesFinn

Hi Robert,

what besides maxing out my wife's social security income through the partnership you created, maxing out her hybrid 401k plan, buying all new electronics using Section 179 depreciation can we do to offset all the short term capital gains.


Even after using all your methods I am still getting crushed by short-term capital gains and need to know if there's any way my son and wife could qualify as employees and me the CEO of our little Hedge Fund. We don't want to mess with Binary Options or Futures even though you told me their capital gain mixture of LT and ST are treated better.



How do we qualify for "carry interest" status like Mitt Romney and reduce our tax rates on short-term since I get the extra whammy of living in California and getting it's wonderful 9% addition to the IRS's already 35%. Is the next step to "incorporate" like you recommended awhile back?


I tried another firm that charged a percentage of savings instead of your flat-rate, any ideas? Your methods are great, I thought being more aggressive with another guy would help but he's too aggressive if you know what I mean!

Thank you!

TJF
 
Is Congress going to try to eliminate the 12% tax rate (assuming they even pay that on carry-interest, once I thought mark-to-market accounting was something (1990s) because you could take a NOL from a bad year and apply it back three years of good years. Have not had to use a NOL for years, risk-management finally kept me from blowing up. Will they pass any Amendment to Carry-Interest because Wall Street's firms like Cerebus, Bain, Pershing you know pay plenty in lobbying fees to avoid paying what we do "marginal tax rate" I mean. Thank's for the link!

JJ
 
JJF, I don't think you understand how carried interest works. The PE shops that receive carried interest are able to convert their fee (which should be taxed as ordinary income) into being taxed in the same shape as the investment. This only works if the investment is long term capital gains, which for PE shops is generally the case). If you are day trading, you don't get any benefit from carried interest unless your short term capital gains rates are less than ordinary income rates.
 
Hi newwurldmn, how have you been? You always treated me good here and if I can help you let me know, be more than happy to do a few Skype Trades to make up the time you spent helping me. I thought Robert Green CPA and Buddy (Harold) might know, they are great with taxes and have treated me great over the years. I appreciate your insight but what do I do to stop the bleeding with short-term capital gains. If you know taxes I am happy to print out or snippet or fax you copies of my Brokerage Statements for help. newwurld I am desperate. The last guy I used worked for (A?) won't add the other initial because the wrath of all will smash me to pieces.



What can I do to stop the bleeding from my account to the Fed and California Franchise Tax board? The hybrid 401ks for all three of us, the maxing out of my wife's Social Security by moving money from the Partnership over to her side as wages (Self-Employment Tax), as mark-to-market traders we don't get to pay self-employment tax unless Robert or Buddy either incorporates or creates a partnership. Robert is super honest, he was not big on doing the Corporation when I hit the high $XXXk, he started my Partnership and took a previous years taxes from a gross mid $XXX to $329, that's a huge discount Robert did! That was after he had me buy the top of the line 6000 lb truck ($68,000 truck he wrote off the top line because it qualified as farming, I started farming then!).


I am looking for advice now, it's August and I am at a All-time High in my Equity, you can call me full-of-sht but Robert Green CPA or Harold or Robert's competitor who did my taxes in 1994-1999 when I discovered Robert's shop in Connecticut he helped rein in the aggressive methods used by another well known author. Perhaps Robert can answer this and I can give him his retainer, usually if you pay him $5000 to $8,000 he's will save you ten times his fees. This last guy who did my taxes was charging me a percentage of what Robert would have saved me and his method. The IRS has not bugged me, they are cool and don't want to go through 100,000+ day trades. If you think this is BS like those arses who attacked me for advice dealing with family and don't believe I know how to trade, disregard this but thank you for taking the time to consider this welcome but challenging tax situation.



This year is different, I need help and I am desperate to not pay them 45% because it's all short-term capital gains treated as ordinary income!
 
Banjo said:
https://www.congress.gov/bill/114th-congress/house-bill/2889
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Thank you Banjo,

My old friend newwurld has helped me understand "carry interest" won't work anyway, only if I held these positions long-term like Ackman, Romney or Feinberg (Cerebus Capital), these guys buy companies with large asset bases plus they can hold on to them without risk of loss since they usually buy $.50 on the dollar. Thank you again newWurld, how as your trading been going my friend?
 
JesseJamesFinn said:
honest
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Not sure what you trade. I'm also a full time trader. We do get a tax benefit trading futures. Maybe not your cup of tea. Sometimes the benefit of being a great trader is having to pay taxes. If you have used Green than I'd be surprised if he hasn't already helped you to his fullest. Good luck.
 
Hi Jay,

your probably right, with the news of Hedge Funds liquidating and taking massive losses again it makes the little guys feel really small. We try to protect ourselves by seperating money using the submarine theory of finance. My Partnership has been maxed out, I think the S-Corp is the best way to go to create ways to reduce income tax. After Robert I used another more aggressive CPA, need to research this much more. Thank you!
 
JesseJamesFinn said:
Hi Robert,

How do we qualify for "carry interest" status like Mitt Romney and reduce our tax rates on short-term since I get the extra whammy of living in California and getting it's wonderful 9% addition to the IRS's already 35%. Is the next step to "incorporate" like you recommended awhile back?

Thank you!

TJF
More...

Carried interest is a Schedule K-1 profit allocation in an investment or trading partnership tax return earned by the investment manager in lieu of incentive or performance fees. Incentive fees are revenues to the management company, taxed as ordinary income and subject to FICA/Medicare (payroll or SE taxes), too. A profit allocation is better since it allocates a share of short and long-term capital gains and portfolio income which is not earned income subject to FICA. Plus, if the fund has long-term capital gains or Section 1256 lower 60/40 capital gains, the profit allocation has further tax breaks for the manager.

If you don't have outside investors and just your own fund or trading company, profit allocation doesn't help, as it moves money from one of your pockets to the other. Without trader tax status, that will even hurt you causing investment expenses to the investor pocket.
 
JesseJamesFinn said:
Hi Robert,

what besides maxing out my wife's social security income through the partnership you created, maxing out her hybrid 401k plan, buying all new electronics using Section 179 depreciation can we do to offset all the short term capital gains.

Thank you!

TJF
More...

High-income traders qualifying for trader tax status (TTS) should consider a defined-benefit plan where they can contribute up to $210,000 per year. You need an entity to create officer's compensation and we recommend either a trading company (qualified for TTS) taxed as an S-Corp. Or, a trading partnership with C-Corp management company for the employee-benefit plan deductions. Learn more at http://greentradertax.com/trader-tax-center/retirement-solutions/.

Traders save tax money with these breaks:

Deduct every expense related to business with TTS, avoiding investment expense limitations.
Use Section 475 for tax loss insurance on securities.
Set up either a Solo 401(k) or defined-benefit plan.
Try to get Section 1256 lower 60/40 tax breaks.
Avoid wash sale problems.

Stay clear of overly aggressive schemes to get into tax trouble.
 
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