Trading within LLC

Forum|Forum|2 years ago
December 15, 2023
2 replies
8 views

Hi all,

I formed an LLC and have been selling cash secured puts with weekly expirations collecting premiums. Where do my profits go on schedule c or schedule d? Also do i just put my expenses for setting up the LLC on schedule c? Lastly how would this be taxed as capital gains or ordinary income? Thanks

Anonymous_

Level 15

Schedule D and capital gains (losses) unless you are a dealer in securities.

Critter-3

Level 15

Unless you incorporated the LLC is a disreguarded entity for income tax purposes and the trades are reported on your tax return as if there were no LLC.

Mike9241

Level 15

you can deduct your trading expenses on Schedule C if you qualify as a trader otherwise you are an investor that would make those expenses non-deductible.

Traders
Special rules apply if you're a trader in securities, in the business of buying and selling securities for your own account. The law considers this to be a business, even though a trader doesn't maintain an inventory and doesn't have customers. To be engaged in business as a trader in securities, you must meet all of the following conditions:
You must seek to profit from daily market movements in the prices of securities and not from dividends, interest, or capital appreciation;
Your activity must be substantial; and
You must carry on the activity with continuity and regularity.
The following facts and circumstances should be considered in determining if your activity is a securities trading business:

Typical holding periods for securities bought and sold;
The frequency and dollar amount of your trades during the year;
The extent to which you pursue the activity to produce income for a livelihood; and
The amount of time you devote to the activity.
If the nature of your trading activities doesn't qualify as a business, you're considered an investor and not a trader. It doesn't matter whether you call yourself a trader or a day trader, you're an investor. A taxpayer may be a trader in some securities and may hold other securities for investment.

there is no specific number of trades a taxpayer must do to qualify as a trader

In Wm Poppe vs Commissioner, he made 720 trades during the year besides meeting the other criteria and was deemed a trader (but failed in the 475(f) election). Generally, professionals advise individuals to do 1000 trades a year.

Mike9241