Entity Tax-Advantaged Solutions For Traders
May 06, 2015 at 4:15 pm EST
Forming an entity can save traders significant taxes and simplify tax filings. Join Green NFH CPA and entity tax expert Robert A. Green CPA as he explains the following:
- Wash sales: By trading in an entity, security traders can reduce Section 1091 wash sale losses with individual investments and IRAs since the entity has a separate taxpayer ID. Keep an eye out for Section 267 related party transaction rules.
- Section 475 MTM: A new entity can elect Section 475 MTM within 75 days of inception and it can revoke the election in a subsequent tax year if that’s helpful.
- Employee-benefit plans: Those who qualify for “trader tax status”(business treatment) are better off trading in an entity vs. individual accounts as a Schedule C sole proprietor. The entity looks much better to the IRS and it also unlocks additional tax savings from employee-benefit deductions (health insurance and retirement plans). Learn how to maximize employee-benefit deductions.
- Best entities: Learn the best choice of entity for different situations. An S-Corp is best for maximizing employee-benefit deductions; otherwise, a partnership tax return works well. A C-Corp is inappropriate as a trading vehicle, but okay as a management company. In some cases, having a trading company and a management company is helpful.
- Costs: Learn about the low costs for forming and operating a trading entity. Tax savings is far greater than cost.
- Timing: Mid-year is an excellent time to form a trading entity. It breaks the chain on wash sales in your individual taxable accounts and there’s plenty of time to maximize employee-benefit plan deductions for the entire year.
I want to recognize Star Johnson CPA for doing another outstanding and professional job on my returns. I have total confidence in her and it is a pleasure working with her each year. She is very professional, patient with my dumb questions and extremely prompt in all matters. Look forward to continuing to do business with you all.