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RTNL
Re: Shoutout to our Model Designers and mechanical, “boring” market beating investing

Along these lines... I have been toying around with the idea recently of incorporating and trading inside of a C-Corp. I haven't run the traps on this or spoken to a professional, but in theory with the tax changes under the last administration wouldn't capital gains be taxed at an ~20% rate whether short-term or long-term?

Anyone else given this any thought?

-Daniel


You will be double taxed the moment you decide to distribute the gains. And the distributions will be ordinary income

May 16, 2022 9:45:21 PM       
RTNL
Re: Shoutout to our Model Designers and mechanical, “boring” market beating investing

Great discussion.

I have clients who pay 50% in taxes on short term gains. Trading those accounts was very difficult to justify. My thinking was that I would need to make double the benchmark in order to make trading worthwhile. I have been beating the market significantly, but not by double.

I am trying to wrap my brains around this.

If we can model tax fees into the sim I might be much more comfortable with the idea. Is that a feature that can be implemented?



That will be great. I personally take short term losses but wait till a year to take gains.

May 16, 2022 9:47:47 PM       
dnevin123
Re: Shoutout to our Model Designers and mechanical, “boring” market beating investing

.

May 16, 2022 9:50:41 PM       
Edit 1 times, last edit by dnevin123 at May 16, 2022 10:00:53 PM
Jrinne
Re: Shoutout to our Model Designers and mechanical, “boring” market beating investing

The solution to this is obvious and mild risky: do what the hedge funds do.

Set up a hedge fund and have a family member run it (and you invest in it). Use the same legal billing system that the hedge funds use and let the family member use the clearly-legal carried interest loophole.

Possibly some legal expense would need to be added to your consideration: Not just a C-corp

But you see this in medicine (and everywhere really). An orthopod finds a way to legally refer his patient's to a family-owned MRI facility: it is just a matter of doing the right paperwork. A hospital gets around the legal problems of paying patients to use their facility (usually a clear violation of that criminal anti-kickback statutes). I can expand on this last if anyone questions this (as well as some of my experience with the FBI, OIG and attorneys on several possible or alleged legal violations in medicine). I won't get into politics and family members (Republicans and Democrats) benefitting from lobbying. Some might call it influence peddling.

I say mildly risky because in medicine at least it is getting harder and harder to find anyone who cares about this type of thing (even within the FBI or OIG). Maybe it is different in finance. But I don't think the carried interest loophole will end anytime soon. It is just a matter if having the means to do the paperwork.

There are always ways in all professions. And honestly, P123 members that have enough money should look at this and/or C-corps and/or "washout sales." This is not just a rant but rather something some members should consider. It's not like you are doing unnecessary procedures or tests on human beings and it is completely legal.

Or you could start an insurance company (e.g., Warren Buffett).

Here is an article: Close the carried interest loophole that is a...private equity executives


-Jim

Great theory, "and yet it moves."
-Quote attributed to Galileo Galilei (1564-1642) gets my personal award for the best real-world use of an indirect proof or reductio ad absurdum.
`

May 17, 2022 5:15:13 AM       
Edit 12 times, last edit by Jrinne at May 17, 2022 6:12:47 AM
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