Set up a Daytrading Partnership (less than 25K)

D

deadreader

I am interested in setting up a daytrading partnership with a family member. I have been sucessfully daytrading for 3 years, but my account size is 15K, so I'm feeling the heat now.

My brother will pitch in another 15K so we'll be over the 25K limit, and I will do the trading. I just wondered about taxes:

In a daytrading partnership we won't have to pay Self employment taxes right?
 
Hi,

Setting up a partnership sounds like a good idea, with regard to self employment tax, there is tons of information about mark to market and all that good stuff on a lot of websites, i am pretty sure that you would have to do mark to market in order to avoid the tax, but double check that.

I thought about gettting a backer/partner in order to continue trading, and I actually have a question myself about that. I have a lot of capital loss carryovers from last year, a lot, and if i incorporate with someone, how will capital gains be divided? 50/50, it would be a lot better if it went against my taxes. comments welcome.
 
Setting up a partnership is very easy. Apply for an EIN from the IRS (www.irs.gov) Once you have your number you open a brokerage account in that EIN.

All income is passed-thorugh to the partners according to their partnership agreement, in other words, 50%-%50 or 70%-30% whatever you decide. The partners are taxed at their own tax-rate. The only tax you pay is Federal Income Tax and State Tax (if that applies). No SE tax, SS tax, or Medicare.
 
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