Hello,
I have a question regarding how to handle my trading profits through an LLC. This year I have been trading through an LLC brokerage account in a manner consistent with a qualified trader - trading daily, in size, and realizing profits intraday or the next day. I want to use the profits from this activity as active income against which I can deduct business expenses and hopefully contribute to a solo 401k. One complication is that upon formation of the LLC account, I collateralized it with a bunch of stock that I have held for years instead of cash. This stock is certainly securities that are held for investment as opposed to held for trading.
My question is: do I have to make the 475(f) election in order to get the profits from the short term trading onto my schedule C? For the most part at the end of the year, I will only be holding a small amount of the securities to mark to market anyway, any profit would have been realized.
And If I have to make the election, can I make the election only apply to the short term instruments and keep the dividends and capital gains from small sales of the held for investment stock on my schedule D? It would be a tax disaster to make the election and have the unrealized gains from the stock marked to market and taxed as active self-employment income.
Lastly I also run a similar strategy in my personal (not LLC) brokerage. I would like to keep that profit on my schedule D as well; and only have the profit from short term trading through my LLC account on my schedule C. Would this be possible if I take the 475(f) election?
This forum has been so helpful to me in the past, just wanted to say thanks to all the contributors here!
