The Puerto Rico Tax Break can only make sense for Futures/FX Traders

[MRBRETTONWOODS]

The Puerto Rico Tax Break can only make sense for Futures/FX Traders

Short-Term Capital Gains rate is still 33% vs 43.4%, so for equities/fixed income traders, it's not a real difference, considering that you'll actually have to live in Puerto Rico. Basically meaningless.

For Futures/FX, as a result of the 60/40 tax treatment, things get more interesting.

The current blended 60/40 rate (43.4+23.8) results in a tax rate of 31.64%.

For Puerto Rico, as the long-term capital gains rate is 0, the blended tax rate becomes 13.2%.

So, you'd basically be able to save almost 20% on taxes.

 

[MoreLeverage]

The old rules were low rates on long term gains only. The newer rules apply to both long and short term gains. Beware of gains accrued before moving, but that doesn't matter much for traders.

 

[Robert A. Green]

PR exempts 100% of all capital gains, including futures, day trades, Section 475 and otherwise.

http://www.greencompany.com/blog/index.php?postid=215

 

[Robert A. Green]

PR exempts 100% of all capital gains, including futures, day trades, Section 475 and otherwise.

http://www.greencompany.com/blog/index.php?postid=215

Webinar about PR today https://www1.gotomeeting.com/register/154480465

 

[piezoe]

Puerto Rico is in Horrible Financial Condition. Corruption and Nepotism among government employees and officials is rampant. There is a significant exodus of the upper middle class going on. The crime rate is exceedingly high.

 

[Robert A. Green]

Puerto Rico is in Horrible Financial Condition. Corruption and Nepotism among government employees and officials is rampant. There is a significant exodus of the upper middle class going on. The crime rate is exceedingly high.

I hear the same from a neighbor who lives in NYC and PR.

Govt grants generous tax incentives to areas under distress like Detroit.

I hear power is not that reliable in PR and traders need dependable power for trading systems.

 

[piezoe]

Yes. I think one should weigh these problems against the potential advantages of trading from there very carefully.

 

[bone]

My understanding from a client:

You will want to live in a gated community. Real Estate prices are more expensive than some US states. Utilities are more expensive than many US cities. Electricity can be erratic short- term but good battery back-up solves most of those issues. Reliable, high speed internet to mainland brokers is an issue. The new tax laws were enacted because of a huge exodus of educated PR's to the mainland looking for opportunities, and there has been a correlated spike in crime. You will also need to know Spanish for practical communications in terms of daily interactions for shopping, dining, etc.

 

[Daal]

PR exempts 100% of all capital gains, including futures, day trades, Section 475 and otherwise.

http://www.greencompany.com/blog/index.php?postid=215

Robert,
don't you think that this tax break is so huge that they will be forced to close within 1 year or so? I bet a lot of folks will be taking advantage of this. the financial incentive is just too great

 

[toolazy]

I do not understand what is this all about.

If you have winning year, you will pay X% tax. If you have losing year you will be able to save loss for next winning year and claim against it. So it is symmetric and all you need to do is increase bet size.

Say if tax is 33%, then your bet size has to increase from 100 to 150 to gain what you would in 0% tax place. Losses will be subsidised by tax credits.

That is not such a big deal , or am I missing something ?

Only difference would be for a person that does not use leverage as cant increase bet size beyond certain point.