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