- Is a Financial Transactions Tax Coming to the U.S.?
The Traders Podcast with Rob Booker (Bonus Episode)
Interview of Robert A. Green, CPA on FTT, fiscal cliff,
tax politics and year-end planning for 2012
Dec. 7, 2012. It's around 35 minutes.
- In this special BONUS episode of The Traders Podcast, your host
Rob Booker catches up with Robert A. Green CPA, a tax expert who
has prepared the returns of thousands of traders from all over the
world. Bob is also the founder of Green Trader Tax.com. Our friend,
Bob, visited The Traders Podcast to discuss a financial transactions
tax that was passed in France and is in the process of being passed
in 11 countries in Europe. He discusses the possibility of this
financial transactions tax coming to the United States.
- So, Mr. Green encourages U.S. traders to call their representatives
and raise their voices about this financial transactions tax. Bob
has provided a petition, which he encourages everyone to sign, in
order to block the financial transactions tax in the U.S. Bob asks
the listeners to sign this petition, and send it to Congress.
- Year-End Tax Planning for Traders
Trader Talk Podcast with Tim Bourquin of MoneyShow.com
Interview of Robert A. Green, CPA on Nov. 5 and published on
Nov. 8, 2012
here for the podcast audio and text versions
20-minutes in length.
Robert covers the content from his recent blogs on the fiscal
cliff and entities.
- What to Do If You Get Audited for Traders.
The Traders Podcast with Rob Booker
Interview of Robert A. Green, CPA
Monday, June 25, 2012. It's around 27 minutes.
See the full description by Rob Booker.
here to learn about our IRS representation services.
We have a full chapter
on IRS exams in Green's 2012 Trader Tax Guide.
We converted our conference calls to Webinars
(with recordings) to add video, including PowerPoint slides and other
presentations. In the past, our clients called a telephone number for a
weekly conference call (most Thursdays at 4:15). Now, we invite our clients
to register for our regular Webinars. They are easy to login to using the
popular GoToWebinar service. Most Webinars are free to attend live, and
after the live event we offer access to recordings for a nominal charge.
We have an exciting calendar of upcoming Webinar events, so please click
here to learn more and register today.
Podcast Recordings Available:
Links to our recent conference calls are included below. You can also
stream the podcasts on our Facebook
Jan. 20, 2011 Podcast
here for streaming mp3 file (75:00 length). Good to play on mobile
here for Windows Media Player version. Better sound quality on computer.
You can play this audio (wmv) file at fast speed and slow it down
when you hit the part you like best.
0:00 - 05:00: Introductory comments on tax season issues, including forex
treatment nuances and open questions. New packages are available from
GreenTraderTax to meet the needs of traders.
05:00 - 10:45: More comments on starting a new trading business. Any
special benefit of S-Corp vs. LLC in California. Answer covers the California
S-Corp franchise tax and how to reduce it with a second partnership entity
owning 99 percent of your trading business and the S-Corp owning 1 percent.
SMLLC S-Corp is the best option in California for single people. A general
partnership is best for a husband and wife. How to handle an administration
fee or payroll instead for purposes of AGI deductions including retirement
plans and health-insurance premiums. You can act as your own registered
agent in your home state; you don't need a third party. Details on the
new entity formation process and how it works.
1045 - 13:25: Other issues with new entitles to consider like professional
vs. non-pro data feed fees. How to avoid higher professional data feed
fee rates with an entity. Institutional brokers don't want to work with
individual accounts anymore and insist on entity accounts. Check out GreenTraderTax
Institutional offerings coming soon.
13:25 - 24:00: Latest developments on new investment adviser rules under
Dodd-Frank and regulations being crafted now. The SEC is punting smaller
funds to states for regulation and that makes it very tricky for advisers
and their attorneys. There are some unintended consequences. States are
all over the map on regulation and this complicates things for advisers.
SEC and states are beefing up audits of investment advisers too. Are mock
audits a good idea? Will Republicans slow down the regulators by challenging
their beefed up budgets? Can states afford to expand their oversight roles
too? We make comments on California and New York state regulators too.
24:00 - 29:35: Forex advisers seek exemptions from new rules to register
as CTAs and CPOs. Clever ideas but will they work? Green discusses issues
for American forex traders in dealing with the new CFTC forex rules too.
The WSJ ran a story to confirm our story about the forex brokers being
under regulatory scrutiny over price slippage and other infractions.
29:35 - 31:15: Non-U.S. advisors also need to register under Dodd-Frank.
U.S. investors are interested in international investing so these foreign
managers need to comply with U.S. regulatory rules.
31:15 - 35:34: Dodd-Frank Fin Reg forces more off-exchange contracts
like derivatives onto futures exchanges for clearing, and not necessarily
trading. Congress and the IRS are being very stingy with Section 1256
lower 60/40 tax treatment. The deficit commission may do away with 60/40
35:45 - 43:55: Question on amending a prior year tax return to report
a large forex ordinary loss. How do forex ordinary losses work with trader
tax status? They are full business losses that can be carried back and/or
forward as an NOL. But without trader tax status, it's a personal loss
that may be partially wasted, for the negative taxable income portion.
When should forex traders make the opt-out capital gains election for
capital gains and loss treatment? Green answers and explains lots of nuances.
Green mentions the pluses and minuses of amended tax returns and how they
43:55 – 55:10: Question about trading stock options and stocks,
and concerns about the IRS challenging stock options traders on trader
tax status. Green discusses his new blog article on an important tax appeals
case for a stock options trader. We received a favorable outcome. Green
explains this appeals case and how it breaks new positive ground for stock
options traders. Green reviews tax court cases and the state of the law
55:10 - 56:26: Q&A on the costs, benefits and nuances of amended
56:26 - 59:27: Question about trading forex for part of 2010 only, entering
and exiting the activity during the year. Green explains how this client
seems to fall short of trader tax status and should use investment expense
rather than business expense treatment. We can still help with lower billing
rates for investors vs. business traders.
59:27 - 1:00:10: New CFTC forex rules and how they affect foreign forex
1:00:10 - 1:02:20: Question about our golden rules for trader tax status.
We raised the number of round trip trades over the years and explain why.
Green explains how we modify our rules each year to reflect what’s
happening in the field with the IRS and current tax court cases.
1:02:20 - 1:04:49: Can a person collect unemployment benefits and trade
at the same time? Green explains how trading does not conflict with unemployment
but it can if you take a fee from a trading entity. Be very careful with
trading, you can lose money and unemployed people are usually on a strict
1:04:49 - 1:07:05: Question on currency futures on futures exchanges.
They get Section 1256 60/40 tax rates by default. Green discusses currency
futures vs. forex.
1:07:05 – Green’s closing remarks.
Dec. 9, 2010 Podcast
here for streaming mp3 file (67:00 length).
Topics: Year-end steps for traders including a full laundry list of dos
and don'ts. Retirement plans, payroll vs. admin fees, estimated taxes,
wash sales, tax elections and more. Husband and wife defacto or verbal
partnerships and potential look-back solutions. It's not easy to do. Prop
trading firms. Tax and regulatory matters. Dos and don'ts. How to deduct
expenses related to prop trading.
Nov. 11, 2010 Podcast
here for streaming mp3 file (75:00 length).
Topics: Important forex tax update, year-end tax planning with entities
and MTM elections, and additional topics. See full details in our email
- Forex tax update and how it relates to recent forex regulation rule
changes. Green covers highlights from our new blog article “Forex
Tax Update” dated Nov. 11, 2010.
- Which U.S. and offshore forex brokers and/or banks should traders
consider using now that the CFTC's new retail forex trading rules are
in effect? Only foreign banks have 270 days of additional time to register
with the CFTC (by July 16, 2011). Green explains how U.S. banks offering
retail forex platforms provide FDIC insurance, and the same 50:1 leverage
on major currencies. Some foreign banks offer retail forex like Deutsche
Bank in the UK. Green reviews recent NFA enforcement actions against
U.S. forex brokerage firms, which is a cautionary note. Will Dodd-Frank
be watered-down by Republicans, who may want to soften some of the new
rules? It could be watered down by changing the term “U.S.-only
financial institution” back to the original “financial institution.”
- Green goes over year-end tax planning strategies using entities and
tax elections to maximize trading loss deductions and avoid capital
loss carryovers and wash sale loss deferrals. Wash sales can be a good
thing when you can convert them into ordinary business losses in the
following tax year with a Section 475 MTM election, and Section 481a
adjustment. It’s confusing, but very valuable to your overall
- Green gives his latest feelings about extending the Bush tax cuts
during the lame-duck session starting next week or during the next Congress
early next year. The easiest thing would be to simply extend all the
tax cuts and AMT patch for two years. Tax reform and deficit commission
proposals could be considered within that two-year period. Can we count
on this Congress to get the tax cut extension done?
- New rules for investment management businesses per Dodd-Frank Fin
Reg and how there is significant divergence between state, SEC and CFTC
regulators. Dodd-Frank Fin Reg raises the SEC hurdle rate for registration
to $100 million or $150 million for a hedge fund (up from $25 to $30
million), so many smaller funds are punted to state regulators, and
their rulings are all across the map. Suggestions for dealing with difficult
state regulators. If Dodd-Frank is watered-down by Republicans, will
the SEC promulgate on their own many of the new investment manager rules,
as they attempted to do in prior years before the Goldstein court case
- Prop trading firm tax question about independent contractor trader
with a 1099-Misc. vs. a LLC member with a Schedule K-1. Tax treatment
differences and a recap on the prop trading firm industry model.
- New prop trading firm structure: a hybrid prop trading firm/hedge
fund. Outside investors put up money passively and prop traders join
with their own "first loss" capital, leveraged by the firm
9:1, while it uses the investors' capital. This must all be carefully
done and fully disclosed to both prop traders and the passive investors
in the hedge fund.
- Brazil financial transaction tax (FTT): a one-time toll charge on
hot money inflows. Green doesn't think it will set a precedent for an
FTT in the U.S. or EU. There were many advocates for a wider FTT going
into the G-20 meetings.
- Deficit commission trial balloon: Green was asked his opinion about
the flatter tax/no itemized deductions, much lower income tax rates
and the lack of distinction between ordinary and capital gains income.
Green explains what he likes about the proposal and how it might influence
current tax decisions that Congress needs to make on extending the Bush
and other tax cuts.
Oct. 28, 2010 Podcast
here for streaming mp3 file (75:00 length).
Topics: Is forex safe? Year-end planning & tax changes, trader tax,
investment management and more. Additional topics per email
- Is forex trading safe in the U.S. even with RFED or FCM duly registered
brokers with the NFA/CFTC? U.S. forex brokers don't have "segregation
of asset" money protection rules, whereas futures brokers are subject
to those rules. The new CFTC forex rules call for higher minimum net
capital requirements for RFED forex brokers vs. futures brokers, so
that helps cushion the concern about money protection issues. We compare
forex trading with currency futures trading in several ways.
For warnings about hidden problems with forex brokers, see Erskine
vs. CFTC 06-3896. The CEO of Rockwell Trading brought up this court
case and discussed his concerns about forex brokers and their platform
markets on our Oct. 27 Webinar. The CEO focused in on this quote in
the case: This forex market, which is central to this case, is not
a public market, but is instead a "negotiated market," in
which--according to the parties--foreign currency prices (the prices
used for the trades in this case) are “constructed” by the
FCMs using “software to process and distill currency prices offered
by numerous banks and come up with an indicative market price.”
As I said on that Webinar, keep in mind that this court case occurred
before the new CFTC forex brokerage rules went into effect on Oct. 18,
2010. The retail forex industry should be run better with the new rules.
Later in the call, we circle back on the "segregation of asset"
rules; we will try to do more research on it for next week.
Update: We just noticed a troubling NFA
news release dated Oct. 28, 2010 "NFA orders $459,000 monetary
sanction against New Jersey forex firm Gain Capital Group LLC."
Read the text of the entire Complaint included in the release.
similar NFA fine of $320,000 against New York forex firm IKON Global
Markets. Per the NFA release, "The Complaint alleged that IKON
engaged in certain price slippage practices on the MetaTrader platform
that were favorable to IKON and caused disadvantageous trading conditions
for certain customers. The Complaint also charged that IKON failed to
supervise the MetaTrader platform used for their forex business, and
failed to supervise the firm's operations." I wonder if "slippage
practices" are what Rockwell Trading CEO is warning us about?
The CFTC and NFA are scrutinizing forex brokers more now after their
Oct. 18, 2010 effective date for RFED registrations in accordance with
their new CFTC rules for forex transactions, sanctioned by Dodd-Frank
Fin Reg too. The NFA
website has several good new guides including Forex
Transactions: A Regulatory Guide.
American forex traders are being forced to trade with no more than 50:1
leverage on the major currencies (20:1 on minors), FIFO (no hedging
rule) and without any form of money protection. Because leverage with
currency futures is not far off 50:1 (30:1 on the CME, for example),
hedging may be easier with futures, and futures brokers must segregate
assets for some protection. We will compare tax treatment between forex
and futures next week. More forex traders may want to consider trading
currency futures too.
- How new traders can maximize tax benefits from pre-business trading
classes. There are several pitfalls, dos/don'ts and scams to avoid.
See Green's three-part blog series starting on Feb.
- The best types of entities for traders in California, Illinois, New
York, Texas and in other states. General partnerships are good for married
couples whereas single-member LLCs are good for single people. Each
state is different and Green gives some examples.
- Green explains how entrepreneurs are risk-adverse; they aren't risk-takers
as is widely perceived. Green tells the story of John Paulson, the famous
hedge-fund manager and Ted Turner, the TV magnate. Traders and investment
managers are entrepreneurs too.
- Trader tax status and the power of Section 475 MTM "tax loss
- Green gives his predications about the Bush tax cuts and brainstorms
how it all may unfold in Congress and with the President.
- What new types of taxes may the Deficit Commission report on in December
and what may be taken seriously by Congress soon? Green discusses the
flat tax (a means of taking away itemized and AGI deductions), a fair
tax (a regressive national sales tax that could sink a consumer-driven
economy), and the likelihood of higher income tax rates in the future.
See Green's articles on different tax ideas in the Traders
Association (under "Big Picture" and "More"
on the left side).
- How to go for the tax-gusto with a Roth conversion before 2010 year-end
and having the ability to unwind it (with hindsight) if it doesn't work
out for you by next year.
Oct. 21, 2010 Podcast
here for streaming mp3 file (75:00 length).
Subjects: Year-end tax tips for this uncertain time. Click
here for Robert Green's blog article dated Oct. 19, 2010.
Additional topics per email
invitation: New CFTC forex rules, Financial-transaction tax, Dodd-Frank
Fin Reg changes, Investment management business and more.
With Q&A we discussed: trading in retirement plans with do's and don'ts
tax and regulatory-wise; Roth versus regular retirement plans and more.
Sept. 30, 2010 Podcast
here for streaming mp3 file (78:00 length).
Subject: Updates on new CFTC forex rules, FTT, Bush tax cuts, trader tax
For a full description of this podcast, read our related blog on Oct.
1, 2010 "U.S.
retail forex traders have 270-extra days to trade forex with foreign banks,
versus non-RFED forex brokers."
Sept. 23, 2010 Podcast
here for streaming mp3 file (80:00 length).
Subject: Offshore retail forex trading accounts are being forced back
to the U.S.
New blog articles on this subject:
10 - Offshore retail forex trading accounts are being forced back
to the U.S.
Sept. 2, 2010 Podcast
here for streaming mp3 file (85:00 length).
Subject: New CFTC forex trading rules were released on Aug. 30.
New blog articles on this subject:
10 - Can American off-exchange retail forex traders evade strict new
CFTC rules by trading on offshore platforms?
10 - New CFTC forex trading rules call for 50:1 leverage.
Aug. 12, 2010 Podcast
here for for streaming mp3 file (75:00 length).
Subject: Forex trading after Dodd-Frank Fin Reg and expected new CFTC
here to read our invitation for this call, including this week's blog
on the subject.
Our special additional guest was Charlie Delano, Director of Government
Affairs for FXCM.
Facebook testimonials on this podcast:
"Terrific session! This was the best session I've listened to
so far, especially since it was concerned with the most important forex
issue we have faced in many years and probably will face for many more
years. Keep up the good work and keep the info coming."
"Good session today. Great commentary and perspective. Thanks!"
With the help of three attorneys plus special guest Charlie Delano of
FXCM, Robert Green dissects the Dodd-Frank Fin Reg bill and how it puts
shotgun-type pressure on the CFTC to finalize its proposed draconian regulations
for forex traders by the Oct. 19 deadline. If the CFTC doesn’t act
on time, will non-eligible contract participants (small retail traders)
be barred from trading in the U.S.? Will American forex traders be able
to trade with better leverage and perhaps more lax regulations on foreign
platforms? Maybe not.
This Webcast is a must-listen for all forex traders, brokers and others
in the forex and futures industry. Like it or not, regulatory change is
coming hard and fast to forex and other off-exchange derivatives and you
better be ready for it.
Green starts off this Webcast explaining the big-picture concerns of
forex traders and he drills down on the legislative details in Dodd-Frank,
specifically Section 742 “Retail Commodity Transactions” (which
includes forex and swaps) and Section 929Y on “extraterritorial
study” and powers.
Much in Dodd-Frank Fin Reg is left to interpretation by regulators and
how those regulators will act is not yet known. Will the CFTC promulgate
its January 2010 proposed rules or will it heed the advice from the industry
to soften its draconian changes, including changing leverage to 10:1 from
Our team connects the dots between these various initiatives and bills
to try to clear up popular misconceptions in the marketplace. We tie together
Dodd Frank Fin Reg, the CFTC’s proposed rules published in January,
the CFTC Reauthorization Act of 2008 (CRA or Farm Bill), the Over-the-Counter
Derivatives Markets Act of 2009 and CFTC Commissioner’s “Gensler
Letter” from August 2009.
CFTC Commissioner Gensler asked Congress for authority to regulate “the
entire marketplace without exception.” He asked Congress to broaden
the CRA’s “Zelener fraud fix,” preventing forex companies
from evading regulation. There’s been confusion over the years about
whether forex is truly a “spot” transaction that may be exempt
from regulation, or if forex acts more like a swap trading transaction;
the Gensler Letter describes it as “futures look-alike.” Retail
forex brokers don’t really offer true spot transactions where traders
take physical delivery; instead, traders rollover transactions. This confusion
is settled in Dodd-Frank where off-exchange retail forex is included in
Section 742 “retail commodity transactions” and they are regulated
by the CFTC, a responsibility granted to the CFTC in CRA.
We define “eligible contract participants” (ECPs) mentioned
in Dodd-Frank and explain how ECPs may be spared some (but not all) of
the pending forex regulations. Even ECPs are expected to be subject to
new (perhaps draconian) leverage rules. But ECPs aren’t prohibited
from trading after the deadline if the CFTC doesn’t act on time.We
discuss the pros and cons of forex traders joining forces in proprietary
trading firms — set up onshore and offshore — which may qualify
as ECPs for perhaps some better treatment.
One of the most important discussions we have throughout this Webcast
is whether or not American forex traders can seek refuge from the CFTC’s
new regulations by trading forex on foreign platforms. We address the
pluses and minuses of forming personal tax and regulatory vehicles abroad
to trade foreign markets. It’s fully taxable and reportable in the
U.S. and your state, but will it provide regulatory relief?
As part of the foreign platform discussion, our special guest tax attorney
explains the CFTC’s process for granting approval to foreign-futures
exchanges like the German DAX. Foreign exchanges need this permission
in order to market their futures trading instruments to Americans. Foreign-futures
exchanges apply to the CFTC to receive this permission, and if granted,
the CFTC issues a 30.10 approval letter. Approval is based on the foreign
exchange having similar rules to American futures exchanges. The key question:
How similar must it be? Will the CFTC grant approval to a foreign platform
offering 200:1 forex leverage if it limits U.S. forex leverage to 10:1?
Finally, our team explores how the CFTC foreign-approval process may
be forged with off-exchange trading, since the approval process applies
to “qualified boards of exchange” only. Hopefully the CFTC
will grant approval to foreign regulators for monitoring foreign off-exchange
trading platforms. But how similar must their rules be to American rules?
This extraterritorial area is highly uncertain at this time, yet it’s
of paramount importance to forex traders. We explain the history of the
CFTC and other regulators in applying extraterritorial powers, including
how it’s been recently applied with onerous new bank regulations
applicable to foreign banks doing business with Americans. Plus, we discuss
the IRS and U.S. Treasury’s recent highly publicized efforts to
rein in Americans cheating on their taxes with hidden offshore bank accounts
(like UBS). Forex traders must report foreign-platform transactions on
foreign bank account reports (TDF 90.22-1) as well as the forex trading
income or loss on their income tax returns. These tax forms will alert
the Treasury, who might provide this information to the CFTC. The CFTC
will most likely take action; it could possibly seek to block Americans
from this offshore trading.
Delano concludes the call by saying it’s not time to panic yet,
but it is time to get as informed as possible. We need the CFTC to act
soon and learn the rules of the road. Otherwise, there’s too much
uncertainty. Let’s hope for the best and be ready for the worst.
Aug. 5, 2010 Podcast
here for mp3 file (streams quickly).
Green discusses how the Dodd-Frank Fin Reg bill affects forex trading,
prop trading and other issues of importance to traders.
Forex traders: Congress took a new approach with the CFTC in the Dodd-Frank
bill. The CFTC was dragging its feet on Congress's 2008 Farm Bill calling
for forex regulation, which had been mostly overlooked by regulators for
decades. With Dodd-Frank, retail forex trading will become illegal for
non-participants (traders) unless the CFTC finishes its new forex regulations
in short order (Dodd-Frank Bill Section 742(c)). The comment period on
the CFTC proposals published in January, 2010 expired and Green expects
rules to be published soon.
We imagine the CFTC will drastically reduce allowable forex leverage
from existing 100:1 to a significantly lower amount, but perhaps not as
far as its proposed rule change of 10:1 leverage. Will American forex
traders be able to continue using foreign trading platforms to escape
the reach of Fin Reg and the CFTC (including these new rules)? Green discussed
article "Financial Bill Could Set The Stage For Uneven Retail
Forex Rules" dated July 30, 2010. You can follow the progress of
these regulatory changes here.
Dodd-Frank Section 742(c) has two areas of concern. It updates the Commodity
Exchange Act (CEA) Section 2(c)(2)(D) Spot Commodities (Metals) and Section
2(c)(2)(E) Spot Forex. Google these sections to learn more.
Proprietary traders: Green gave an update on his prop
trading firm alert story covered on his blog (FINRA's
notice to prop traders) dated June 22, 2010. Goldman Sachs told one
of the largest prop trading firms to change its payouts to prop traders
to 80 percent or less, down from 100 percent. FINRA Regulatory Notice
10-18 said that 100 percent payouts were indicative of “beneficial
owners” (disguised customer accounts and these firms are not registered
customer-account broker dealers). Goldman seems to be closely following
all rules now to stay out of trouble with the SEC.
Trader tax status, mark-to-market accounting and entities.
Update on the SE tax loophole for investment managers. Recent Republican
filibusters blocked repeal of this tax loophole from current jobs and
tax extender bills. Green explains how investment managers use S-Corps
to reduce SE tax. He further explains how it's the reverse effect for
Should prop traders join prop trading LLC-firms as an entity member or
as an individual? Green points out how using an entity can be better for
legal protection and better for tax reasons too - unlocking the opportunity
for AGI deductions (retirement and health insurance premiums).
Foreign trading to escape Fin Reg and tax implications.
Commentary from Green sprinkled in to Q&A.
New English-version Form ADVs.
July 29, 2010 Podcast
here for mp3 file (streams quickly).
Q&A format and no commentary.
We covered forex tax treatment and elections, proposed rules to reduce
forex leverage to 10:1, trader tax status and business treatment, IRA
conversions and trading in retirement plans, Section 475 MTM elections,
dealer versus trader status, and more.
July 22, 2010 Podcast
here for mp3 file (streams quickly).
The sound is a little better on the Windows Media Player file.
00:00 – 05:30: Fin Reg changes for hedge funds.
Fin Reg bill includes changes for hedge funds and investment-management
businesses. The accredited investor rule is changed to disallow a primary
residence in the $1 million net worth standard and this change takes effect
on date of passage (July 21, 2010). Existing investors are not affected
unless they add capital like a new investor. The bill closes the biggest
loophole to registration: the “private adviser” exemption.
Managers are given one year to register. Generally, the Financial Bill
requires all investment advisers to hedge funds and/or private equity
funds that manage $150 million or more in assets to register with the
SEC. Form ADVs need plain English going forward too.
05:30 – 08:10: Fin Reg makes it clear that swaps don't qualify
for 60/40 tax treatment.
Fin Reg calls for derivates contracts to be cleared on futures exchanges,
but Congress doesn’t change their tax treatment to lower 60/40 tax
rates. Fin Reg moves many derivative contractors from the private marketplace
to clearing on futures exchanges. In Section 1601 of the bill, Congress
makes it crystal clear this movement isn't like trading and it doesn't
afford these derivatives contracts the regulated futures contract tax
treatment in Section 1256. See
Green’s blog on this topic.
08:20 – 17:25: Tax changes coming.
Question on the Jobless Bill passage. Wasn’t the S-Corp SE tax dropped
from the bill and could it come back? Green answers: The S-Corp SE tax
loophole repeal was dropped from the bill but it could come back in a
Green discusses recent tax-change negotiations and intrigue in Congress
and he gives his opinion on how these changes may work out for taxpayers.
Green discusses the Bush tax cuts expiring, proposed bank taxes, proposed
carried-interest repeal, the end of cap and tax, and more. The maneuvering
is intense and Green thinks gridlock will happen and Bush tax cuts may
go up for everyone, not just the rich. Commentary from Green about the
tax-class wars and private vs. government benefits and the need for government
17:25 – 20:45: Fin Reg’s affect on taxes.
Question: Does Fin Reg affect forex taxes? Green answers no and explains
that Fin Reg is not a tax bill but it does pass on wind-down costs to
the big-banks in the form of bank taxes or levies.
20:45 – 23:52: Beefed-up 1099 reporting in the health-care bill
goes too far.
Green explains there were complaints from gold coin dealers this week
about the new draconian 1099 reporting rules which are included in the
health-care bill. Green says the government has gone too far in distrusting
small business with this type of “catch-the-cheat” 1099 reporting
and other regulations. 1099 reporting is a burden to business, and it’s
expensive and time-consuming. Green finds this trend troubling.
23:52 – 27:45: Fin Reg also goes too far and it’s going to
Why were Fannie and Freddie left out of Fin Reg reform and why are government
managers who missed the last crisis being rewarded with this reform? Green
discusses several of the points in
his blog article from July 21, 2010.
27:45 – 30:45: Update on forex leverage rules and how Fin Reg fits
Any news on the CFTC proposals to reduce leverage on forex trading from
100:1 to 10:1? No conclusion to the proposals yet. Green is guessing that
many proposals were put on the back-burner waiting will be sorted out
now that Fin Reg has passed. It will take some time.
30:45 – 38:00: Will regulators water-down Fin Reg in codifying
New rules for hedge funds and prop trading and how regulators may water-down
some of the draconian language. Green discusses how Fin Reg has a long
phase-in period for the Volcker rule and how Congress may back-track on
hampering U.S. banks in competition against universal-banking in Europe
and Asia – where they will not adopt similar rules.
Green gives more commentary about the problems with Fin Reg, the mirage
of “too big to fail," how Fin Reg can actually cause a run
on the bank and contagion and more.
38:00 – 43:36: Fin Reg changes to the accredited investor rules.
How the accredited investor changes will change over time and if it will
slow down the hedge-fund industry. Accredited investors vs. non-accredited
investors and more. Brokers have a fiduciary duty now and they often sell
hedge-fund investments too.
Managers need to contact their legal counsel immediately to change their
documents for the new accredited investor rules, which apply from day
one. They also need to start planning for registration by July 21, 2011.
State registration rules for investment managers and funds are changing
fast too. Will states adopt some of Fin Reg changes?
43: 40 – 50:00: Government mistakes or trial and error?
Caller comments on government mistakes like repealing Glass-Steagall and
Fannie and Freddie. Green gives commentary and suggests smaller trial-and-error
rather than major reform agendas.
50:00 – 58:50: Proprietary trading firm update.
Question: What is the proper way to join a prop trading firm? Green comments
about the industry and discusses his recent blog article updates on the
subject. Prop trading is a growth industry around the world and prop traders
are leaving U.S. banks to join these firms.
58:50 – 1:01:25: The legal risks in joining a prop trading firm.
Green gives an update on problems and alerts to the industry.
1:01:27 – 1:05:15: Small hedge-fund registrations after Fin Reg?
Question: Do small hedge funds need to register in Fin Reg? Overview of
registration on the federal vs. state level. It can vary greatly by state.
Rules in GA and other states too.
1:05:16: Will states get more aggressive after Fin Reg too?
More states are moving away from the de minimus rule. Many states are
in a period of flux and they could become more aggressive in their interpretations
of SEC rules including Fin Reg. Managers should receive advanced notice.
Colorado and other states.
Green wonders about state budgets, requests for user fees and more. Green
thinks states could get tough and seek user fees and taxes from hedge
fund managers. That seems to be a negative trend.
National vs. state rules are always a concern for businesses. Blue-sky
state law is very important in hedge funds.
July 15, 2010 Podcast
here for mp3 file (streams quickly).
Green discusses passage of the Fin Reg bill today and how investment managers,
traders and bankers should navigate and live with the new rules. There
is more regulation for hedge funds which means more compliance costs,
transparency and oversight. Due to even more restrictions at banks –
limiting hedge funds to 3 percent of capital – there are also more
opportunities for hedge-fund entrepreneurs to expand. Hedge funds escaped
many bank fees/taxes in the last minute of Fin Reg deal making, including
increased FDIC levies (which only apply to FDIC banks).
Hedge funds. The following are excerpts from Bloomberg
and Green discussed these points with his own take on things.
- Any firm with $150 million or more in assets must register under
the new rules. Larger hedge funds can’t use prior exemptions to
avoid registration. Registration subjects funds to periodic inspections
by SEC examiners. Funds also must hire a chief compliance officer and
set up policies to avoid conflicts of interest. Hedge and private-equity
funds will be required to report information to the SEC about their
trades and portfolios that is “necessary for the purpose of assessing
systemic risk posed by a private fund.”
- Registration rules may cost hedge funds as much as $500 million in
the first year. The estimate is based on 2,000 new registrants and reflects
the cost of implementing necessary compliance procedures. That’s
expensive. Should the government determine a fund has grown too large
or is too risky, it would be placed under Fed supervision. Restrictions
on banks’ ability to own hedge and private-equity funds and trade
for their own accounts may benefit the funds that are subject to less
regulation. The bill could push new investment and trading talent toward
the industry. Limits on leverage and stiffer capital requirements for
banks may also give hedge and private-equity funds an edge landing investors
chasing bigger returns. –Robert Schmidt.
Fin Reg’s wind-down procedures are scary in my view, as I wrote
about on my blog earlier. Managers of covered institutions are subject
to many risks, just like in a private partnership, except they are not
partners who can control risk in that type of capacity. Fin Reg has the
power to claw-back compensation and recover other losses from managers.
Are bankers crazy for staying at banks with this type of personal risk?
Many should leave for hedge funds.
Impact on traders: Some derivatives are moving to exchanges. Can traders
enter this derivatives exchange-traded marketplace? It might be an opportunity.
Will the Bush tax cuts be extended? Green gives his take on how this may
June 30, 2010 Podcast
here for mp3 file (streams quickly).
Opening remarks from Green on Fin Reg and tax changes.
Developing secondary market for investors selling hedge-fund investments
that are otherwise “gated” or locked. During the market crisis,
some managers put up gates to prevent investors from executing redemptions.
Commentary from Green on the latest developments of a potential financial-transaction
tax and other bank fees/taxes in the U.S., EU, Eurozone and G-20.
New idea: Using single-purpose LLCs with investors or prop traders to
reduce regulatory compliance challenges and costs and improve tax efficiency.
With a typically managed account, the trader can’t deliver trader
tax status business benefits to the investor, so the investor often times
has trouble deducting investment fees paid to the manager. Conversely,
with a hedge-fund structure (LLC or LP), the manager can deliver trader
tax status breaks to the investor, plus get carried-interest tax breaks
– a share in long-term capital gains and no generation of self-employment
(SE) taxes. Why not convert a large managed account into a special-purpose
LLC to solve these tax problems? We discuss how.
The special-purpose LLC can also help solve some brewing troubles in
the prop trading industry. First, read Green’s blog
on FINRA’s Regulatory Notice 10-18, which advises clearing
firms to spot beneficial owners, perhaps disguised retail customers.
To solve these concerns, you can put good prop traders into their own
special-purpose LLC with the manager and main funder of the trading.
The manager/funder can put up all the money and/or the prop trader
can contribute some capital too. It’s not deemed a deposit and
looks good as true capital. Profit and loss sharing can be as desired,
but figure it’s 80 percent to the prop trader and 20 percent to
the manager. This strategy seems to do away with the deposit problem
and it also may solve the “kill what you eat” profit-sharing
problem too. It’s more tax and regulatory efficient.
Medical expense reimbursement plans (MRPs). Fringe benefit plans only
work with C-corps or sole props/SMLLCs. They don’t work with pass-through
entities, even with a salary, unless neither spouse owns more than 2 percent
Most traders don’t need an MRP, but a few may benefit from one.
We can help you assess the situation and set up the plan too. Be careful
to avoid other tax firms harping on the benefits of these plans in order
to sell two entities to start with. Unless you have trader tax status,
the MRP and other tax breaks won’t work as designed.
It may be best to use a Schedule C and not even bother with two entities
like the C-corp/pass-through entity combination. The two entities are
more cumbersome and harder to defend the purpose of the employee in
the C-corp, especially with trading losses. You need strong trader status
that can stand up to IRS exam. It also only works when the spouse is
actually performing services.
June 23, 2010 Podcast
here for mp3 file (streams quickly).
here for invitation with details on topics to be covered.
June 17, 2010 Podcast
version (streams quickly).
June 10, 2010 Podcast
version (streams quickly).
Commentary from Robert A. Green, CPA on financial regulation in the U.S.
and G-20, carried-interest repeal, new health care taxes on investment
income and overall tax change legislation. Green points out how IRS Section
482 "transfer pricing" rules, intended to increase taxes, have
actually reduced tax revenues and have increased (rather than reduced)
the outsourcing of jobs and value to foreign countries with lower tax
rates like China and Ireland. The latest on the financial-transaction
tax threat from Europe and other commentary on the Euro fiscal and monetary
Throughout this podcast, Green discusses the overall theme for tax-change
legislation: How the agenda has changed from Bush's ideology for lower
taxes on the investor class to Obama's ideology for reversing course;
and expanding taxes on the investor class, investment managers, banks,
the rich and global corporations, while trying to not raise taxes on the
middle class. Green explains the theory, logic and history behind tax-change
Financial regulation provisions affecting hedge funds. It includes an
important change to the accredited investor standards; the $1 million
net worth standard may no longer include a primary residence. Thankfully,
the angel investor amendment passed. This amendment negates an SEC attempt
to block power over smaller funds using the Reg D private placement route
(discussed two weeks ago on our podcast).
Green discusses the pending repeal of carried interest covered on our
blog recently. A final watered down 65/35 (ordinary income/carried interest)
split is not unreasonable and resembles 60/40 on futures traders.
Q&A on a variety of topics:
How will the carried-interest repeal work? How did this controversy arise?
How will the S-corp SE tax loophole repeal work? Will it affect retail
How will the Medicare tax on investment income work in 2013 under the
health care bill? Will it capture all types of income?
We discuss how traders can utilize retirement plans in creative ways.
Do you have to file a foreign bank account form for a U.S. forex trading
account migrated to a UK platform?
Trading in retirement plans to avoid new investment taxes.
Several other good Q&A.
June 3 , 2010 Podcast
version (streams quickly).
Entire session was Q&A with Robert A. Green.
Roth IRA conversion strategies
Bush tax cuts expiring and tax increase fights coming
Repeal of carried interest and S-corp SE tax loopholes
Is 60/40 treatment safe for traders?
Forex taxation, brokers, leverage and regulations in the U.S. vs. abroad
Section 475 and using MTM
NOL rules and strategies
Futures rules and carryback strategies
Suspending a trading business while taking a job
Balancing a job and trading at the same time
The controversy around high-speed trading
May 27, 2010 Podcast
file (streams quickly).
Financial reform focusing on potentially serious changes threatening hedge
fund business plans; and repeal
of carried interest; repeal of S-corp SE tax breaks and other tax changes.
They answer several questions on entities, forex, Roth IRAs, and more.
Commentary from Green including the latest on a potential
FTT effort in Europe.
April 1 , 2010 Podcast
Media Player file (31 MB 75:00 length)