Deduct business expense against stock capital gains

[stech]

I have asked this before and thread went too long. Looking for clear instruction or video to how to file this

i am day trader and have related expenses. Like phone, office rent etc. I have an LLC  opened to offset expenses. My issue is that all expenses goes to Sch C and capitals on Sch D. How does it offset. My total expenses are $5k and capital Gaines are $20k

currently my Sch C is negative which makes me nervous as no income on Sch C

[tagteam · Accepted solution]

See https://www.irs.gov/taxtopics/tc429

You are reporting correctly.

[stech]

Have business loss for straight 5 yrs, wouldn’t raise red flag? Also I have two businesses. So doesn’t that mean I would be offsetting my losses with other business? Since everything rolls up to 1040 and net?

[tagteam]

If you have two different businesses, then you should be filing two Schedules C.

See https://www.irs.gov/instructions/i1040sc#en_US_2022_publink24329wd0e493

[tagteam]

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@stech wrote:

Have business loss for straight 5 yrs, wouldn’t raise red flag?

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The factors the IRS uses to determine whether you are operating with an actual profit motive are set forth in Treas. Reg. §1.183-2(b):

1. the manner in which the taxpayer carried on the activity,
2. the expertise of the taxpayer or his or her advisers,
3. the time and effort expended by the taxpayer in carrying on the activity,
4. the expectation that the assets used in the activity may appreciate in value,
5. the success of the taxpayer in carrying on other similar or dissimilar activities,
6. the taxpayer’s history of income or loss with respect to the activity,
7. the amount of occasional profits, if any, which are earned,
8. the financial status of the taxpayer, and
9. elements of personal pleasure or recreation

See https://www.law.cornell.edu/cfr/text/26/1.183-2

[stech]

Right. I know.

doesn’t both Sch C net goes to one line item on 1040 and above is capital gain? If I have $20k capital gain, $5 expenses related to it. Other business I have $10k income and $30k expenses. Wouldn’t my 1040 show $20k + $10- $5k - $30k = -$5k loss as one amount

[tagteam]

What do you mean by "show....as one amount"?

Your total business expenses would be used to offset your other income and gains.

[dydeanne55]

Hello, Did you get the answer to this?  It seems most answers skirt the real question.  My tax accountant said the expense will lower the amount of tax on the gain, but as an example, the 5K in expenses will only net the % of your tax status, I.e. if you are at a 20% effective tax rate then the 5K will only reduce by $1000, but the 20K gain will have been taxed at short or long term %, whatever that ends up being for your situation. 

I am still looking for a good business to offset my capital gains on a real estate sale.

[tagteam]

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@dydeanne55 wrote:

I am still looking for a good business to offset my capital gains on a real estate sale.

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This thread, and the responses, address expenses associated with daytrading that are reported on Schedule C.

Please provide more details about your situation and you might want to start a new thread.