What needs to be done for you to consider your trading as a hedge fund so that instead of paying income tax you pay capital gains or carried interest? I know that hedge fund and private equity managers get away with paying a max rate of 20%. Many of these hedge funds aren't holding their positions for over a year.
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Trading Shell Corporation for Taxation Purposes (35% vs 39.6%)
- Thread starter MRBRETTONWOODS
- Start date
Quote from kmgilroy89:
What needs to be done for you to consider your trading as a hedge fund so that instead of paying income tax you pay capital gains or carried interest? I know that hedge fund and private equity managers get away with paying a max rate of 20%. Many of these hedge funds aren't holding their positions for over a year.
That's for long-term capital gains, P.E guys/long-term hedge funds pay the 20% carried interest rate, which is now going to be 23.8% after obamacare.
For short-term capital gains/trading, the carried interest is still going to be 39.6% for an individual+3.8%, making it 43.4% now. On the other hand, foreign investors using blocker corporations get their capital gains capped at 35% for short-term capital gains and 20% for long-term capital gains.
Quote from kmgilroy89:
What needs to be done for you to consider your trading as a hedge fund so that instead of paying income tax you pay capital gains or carried interest? I know that hedge fund and private equity managers get away with paying a max rate of 20%. Many of these hedge funds aren't holding their positions for over a year.
http://www.businessweek.com/articles/2013-02-21/a-hedge-fund-tax-dodge-uses-bermuda-reinsurers#p2
Interesting technique, basically John Paulson created a bermudan reinsurer shell corp (PaCRe) which outsources actual reinsurance to a legit reinsurance company, used the shell to invest in the main fund, and then cashed out after a year by selling shares in the company, and thereby paying the long-term capital gains rate instead of the short-term rate.
Keep in mind though that this is for only a small portion of his income, otherwise he will generally end up paying 43.4% rate as the article specifies.
dont forget that if one decides to give up his US passport one must pay an exit tax on his assets. Although I'm sure that if you scattered your assets around the world in hidden shell companies combines with cash buried in the ground of land that is owned by shell corporations you can hide it all.
Quote from cmb:
dont forget that if one decides to give up his US passport one must pay an exit tax on his assets. Although I'm sure that if you scattered your assets around the world in hidden shell companies combines with cash buried in the ground of land that is owned by shell corporations you can hide it all.
It's not as easy as it used to be because of all the new AML/KYC regulations, but doing something like this through bitcoin and using the bitcoin mixing services available to block-off the flow of the funds from prying eyes looking at the transaction history (blockchain) would be an interesting endeavor, to say the least. You can say you 'lost' money speculating in bitcoin, gambling, claim to donate with bitcoin, pay for various services, etc and it would be next to impossible to prove otherwise.
It's apparently worse for US traders than I originally imagined.
http://www.cbiz.com/page.asp?pid=9162
If you're a canadian trading us markets you only pay the 22% canadian capital gains tax rate, and 15% for dividends (under the tax treaty). If you're an american, now you pay almost 43.4% (23.8% long term), and for dividends 23.8%.
This is insane, all traders should seriously consider leaving the US at this point.
*Foreigners are subject to 35% withholding for dividends, but generally tax treaties cause the rate to fall to around 15%, for real estate (also hedge fund/PE partnerships), however, foreigners can still use shell corporations to get away with 35% vs 43.4% that americans have to pay on real estate capital gains.
For Australia, which is another high-capital gains tax nation like the US, it's 44.9% for short-term capital gains, and 22.5% for long-term capital gains
http://www.cbiz.com/page.asp?pid=9162
If you're a canadian trading us markets you only pay the 22% canadian capital gains tax rate, and 15% for dividends (under the tax treaty). If you're an american, now you pay almost 43.4% (23.8% long term), and for dividends 23.8%.
This is insane, all traders should seriously consider leaving the US at this point.
*Foreigners are subject to 35% withholding for dividends, but generally tax treaties cause the rate to fall to around 15%, for real estate (also hedge fund/PE partnerships), however, foreigners can still use shell corporations to get away with 35% vs 43.4% that americans have to pay on real estate capital gains.
For Australia, which is another high-capital gains tax nation like the US, it's 44.9% for short-term capital gains, and 22.5% for long-term capital gains
Edit, For Australia, it's 45%:
There's a 1.5% surcharge, which is rising to 2%, so it will be 47% for short-term capital gains/income in australia.
There's a 1.5% surcharge, which is rising to 2%, so it will be 47% for short-term capital gains/income in australia.