Tax on Foreign Forex trading

B

bmw335isedan

Hello

First question:

I am a US citizen living in South Korea. If I open a account with Tradestation with South Korean address will I qualify for tax exemption up to $95000 for income earned overseas?

Second question:

I heard that I can defer tax indefinately if I create a corporation in Singapore and trade forex under corporation name. As long as I do not bring fund back in to USA. Is this true?
 
Just because the b*stards haven't nailed you yet is no guarantee that they won't in the future imho.

or

To put it the other way - what's the good of a porous tax regime that let's the fish escape ?
 
Quote from bmw335isedan:

Hello

First question:

I am a US citizen living in South Korea. If I open a account with Tradestation with South Korean address will I qualify for tax exemption up to $95000 for income earned overseas?

Second question:

I heard that I can defer tax indefinately if I create a corporation in Singapore and trade forex under corporation name. As long as I do not bring fund back in to USA. Is this true?
More...

(1) Earned income means money from a job. So probably no unless trading is your job. For more exact definition see
http://www.irs.gov/Individuals/What-is-Earned-Income?

You might be able to do it if you set up a corp. and have it pay you a salary.

(2) Only in certain cases on business done outside the U.S. and even then many issues and special tax returns, elections etc.

See
http://en.wikipedia.org/wiki/Controlled_foreign_corporation
 
Quote from bmw335isedan:

Hello

First question:

I am a US citizen living in South Korea. If I open a account with Tradestation with South Korean address will I qualify for tax exemption up to $95000 for income earned overseas?

Second question:

I heard that I can defer tax indefinately if I create a corporation in Singapore and trade forex under corporation name. As long as I do not bring fund back in to USA. Is this true?
More...

The Section 911 exclusion on Form 2555 is only for "foreign earned income" and a housing allowance. Trading gains are not earned income, unless you are a full member of a futures exchange trading futures on that exchange.

We advise business traders living outside the US to consider a US entity for their trading business. To unlock AGI deductions like health insurance and retirement plans, plus a foreign earned income exclusion. Accomplish that with the entity paying you an administration fee, which is the earned income component.

Second question. Americans can't achieve tax deferral with offshore trading entities. They are subject to Personal Foreign Investment Company rules (PFIC), or they are disregarded partnerships taxed in the US, or controlled foreign corporations.

To achieve deferral with an offshore entity - like Apple and Google - you need an operating business (not investing) and have legitimate nexus (operations) in foreign countries. Plus, Americans own under 50% of the foreign corporation.

Forget about deferral. Offshore entities have a ton of tax compliance, professional fees, and you will invite an IRS exam.

Don't forget to file foreign bank account reports (FBAR) every year if you have 10k or more across all offshore accounts at any time during the year. Plus, new Form 8938 for reporting foreign assets.

We cover this all in Green's 2013 Trader Tax Guide. On promotion on our site now.

Lastly, you mentioned a foreign forex account in your thread. The CFTC doesn't allow Americans to have retail off-exchange forex accounts with unregistered brokers, who may allow over 50:1 leverage on the majors. The NFA doesn't allow hedging. You may be okay since you live abroad, although its not clear.
 
Quote from Robert A. Green:

The Section 911 exclusion on Form 2555 is only for "foreign earned income" and a housing allowance. Trading gains are not earned income, unless you are a full member of a futures exchange trading futures on that exchange.

We advise business traders living outside the US to consider a US entity for their trading business. To unlock AGI deductions like health insurance and retirement plans, plus a foreign earned income exclusion. Accomplish that with the entity paying you an administration fee, which is the earned income component.

Second question. Americans can't achieve tax deferral with offshore trading entities. They are subject to Personal Foreign Investment Company rules (PFIC), or they are disregarded partnerships taxed in the US, or controlled foreign corporations.

To achieve deferral with an offshore entity - like Apple and Google - you need an operating business (not investing) and have legitimate nexus (operations) in foreign countries. Plus, Americans own under 50% of the foreign corporation.

Forget about deferral. Offshore entities have a ton of tax compliance, professional fees, and you will invite an IRS exam.

Don't forget to file foreign bank account reports (FBAR) every year if you have 10k or more across all offshore accounts at any time during the year. Plus, new Form 8938 for reporting foreign assets.

We cover this all in Green's 2013 Trader Tax Guide. On promotion on our site now.

Lastly, you mentioned a foreign forex account in your thread. The CFTC doesn't allow Americans to have retail off-exchange forex accounts with unregistered brokers, who may allow over 50:1 leverage on the majors. The NFA doesn't allow hedging. You may be okay since you live abroad, although its not clear.
More...

Wow Thank you so much, I did not know that so many people left me helpful information until now. One more question though, if I leased a membership from CME and use that to trade with TradeStation, will I qualify for Foreign earned income?

Perhaps I should just go with LLC in USA
 
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