Anyone Incorporate their trading / investment account?

[green night]

Quote:

Originally Posted by pb4uski Unless the equipment and car is used exclusively for business then you're going to have to prorate the cost between business and personal (just like any sole proprietor). But even if you can deduct it all then you're paying 35% corporate tax on that $46,500.

Yea, I think that's where I need to learn more about the businesses, pay or dividend myself enough to live off and keep everything else in the business.

Also, health insurance through the business seems advantageous.

I was hoping someone on the site is doing something somewhat similar.

[Fermion]

I have thought about it, but mostly to get earned income and be able to fund a IRA or Roth IRA while retired. Perhaps also get the 50% match for people with low income (assuming the trading did not generate significant income above that level). 50% match to your Roth means you start out very ahead of the game.

I assume if you are a trader it is earned income?

[GrayHare]

Quote:

Originally Posted by Fermion I assume if you are a trader it is earned income?

AFAIK, if it's earned income there's no way to avoid paying Social Security tax.

[green night]

A couple adds and question:

First, again thank you for all the advice and comments.

In the business, I think ill buy a condo or townhouse that my kid can live in during college and use as an investment for other renters and especially longer term.

Can I keep all earnings in the business? For example if I make $100k on stock prices rising and dividends, rent, etc. I don't need to show any income from the business correct? I can continue to rollover paper gains etc over time, correct?

[pb4uski]

Not sure what your question is but if the business doesn't distribute income to you then you would not have any income... however, technically the business would have to impute the value of your kid's use of the condo and that would be income to you, just like any corporation who pays for the personal expenses of owners or executives... on other words, the benefit that you receive by having the company house your kid would be income to you and compensation paid by the corporation.

No such thing as a free lunch.

[COcheesehead]

Quote:

Originally Posted by green night A couple adds and question: First, again thank you for all the advice and comments. In the business, I think ill buy a condo or townhouse that my kid can live in during college and use as an investment for other renters and especially longer term. Can I keep all earnings in the business? For example if I make $100k on stock prices rising and dividends, rent, etc. I don't need to show any income from the business correct? I can continue to rollover paper gains etc over time, correct?

You won't show income, but the business will.

[green night]

Quote:

Originally Posted by COcheesehead You won't show income, but the business will.

This may seem like a dumb question but let's say through some stock transactions the business makes 200k, can the business just pile back in with more investments? It doesn't have to show the gains in that year does it?

[MichaelB]

Quote:

Originally Posted by green night This may seem like a dumb question but let's say through some stock transactions the business makes 200k, can the business just pile back in with more investments? It doesn't have to show the gains in that year does it?

You really need to get professional tax help for this.

[COcheesehead]

Quote:

Originally Posted by MichaelB You really need to get professional tax help for this.

+1
I will tell you that after running a business for 20+ years, the government always gets their share. Remember that saying about death and taxes?

[Texas Proud]

Quote:

Originally Posted by green night This may seem like a dumb question but let's say through some stock transactions the business makes 200k, can the business just pile back in with more investments? It doesn't have to show the gains in that year does it?

Why would you think you would not have to show gains

[green night]

Quote:

Originally Posted by Texas Proud Why would you think you would not have to show gains

I was thinking that if I carryover the gains in a new investment then I wouldn't... it's my understanding that if I sell a house at a profit then buy a new one at a higher cost, one doesn't need to show the gains?

I guess I thought the same concept applied but that's a big assumption.

[COcheesehead]

Quote:

Originally Posted by green night I was thinking that if I carryover the gains in a new investment then I wouldn't... it's my understanding that if I sell a house at a profit then buy a new one at a higher cost, one doesn't need to show the gains? I guess I thought the same concept applied but that's a big assumption.

I think you are confusing a few issues. When you sell an investment for a gain, the gain is either ST or LT. You can use losses to offset those, but if you roll a gain into another investment, the gain has been captured already.

Your house example could be a 1031 exchange, but that is a whole other animal. You really need a lawyer to pull that off.

[harley]

Quote:

Originally Posted by green night I was thinking that if I carryover the gains in a new investment then I wouldn't... it's my understanding that if I sell a house at a profit then buy a new one at a higher cost, one doesn't need to show the gains? I guess I thought the same concept applied but that's a big assumption.

I think you are talking about a very old tax dodge that was done away with years ago. Now if you sell a primary residence, you have a $250K ($500K for a couple) exemption on the profit. But that only applies to a primary residence. As COcheesehead said, for a rental or second home you can do a 1031 exchange to delay paying tax on the gains, but that definitely requires professional help. And none of that applies to stocks.

[Texas Proud]

Quote:

Originally Posted by green night I was thinking that if I carryover the gains in a new investment then I wouldn't... it's my understanding that if I sell a house at a profit then buy a new one at a higher cost, one doesn't need to show the gains? I guess I thought the same concept applied but that's a big assumption.

The home ownership was a special case for individuals.... not for corporation... and it was only for your primary residence... if you had a second home it did not apply...

Basically think that if you sell anything at a profit you might have to pay tax on the profit and you will be in a better place than you are now.... you might have some exceptions here or there, but the default should be 'it is taxable'....

[green night]

Ok, thanks all!