Schedule C to manage investments?

[KarenMM]

Client has professionally managed portfolio of investments. He will lose his (considerable) misc. itemized deduction of investment fees with the new tax law in 2018. His idea is to create a schedule C Investment management business.
Pros?
Cons?
Legality?
This client also has actively managed timber investments, which will go on the same schedule C...
Thanks for your thoughts.

[spanel]

Client has professionally managed portfolio of investments. He will lose his (considerable) misc. itemized deduction of investment fees with the new tax law in 2018. His idea is to create a schedule C Investment management business.
Pros?
Cons?
Legality?
This client also has actively managed timber investments, which will go on the same schedule C...
Thanks for your thoughts.

He wants to pay regular income tax rates + self employment tax instead of capital gains rates to not lose his 2% limited itemized deduction?

Yeah.. that sounds like a good idea.

Chris

[KarenMM]

We are batting around Ideas....

He wants to pay regular income tax rates + self employment tax instead of capital gains rates to not lose his 2% limited itemized deduction?

Yeah.. that sounds like a good idea.

Chris

With the 20% pass-through rate on businesses, and 100K of misc itemized deductions, the numbers may work?

[spanel]

With the 20% pass-through rate on businesses, and 100K of misc itemized deductions, the numbers may work?

Does he handle other investments besides his own?

Chris

[KarenMM]

Related parties only

Does he handle other investments besides his own?

Chris

He handles kids, siblings, parent, siblings partnership and kids partnership investments....

[spanel]

He handles kids, siblings, parent, siblings partnership and kids partnership investments....

I would find it hard to believe this would fly with the IRS because outside of his family, he is not offering services to the general public.... assuming it would even save him money...


Chris

[kathyc2]

Without even talking about all the others issues with this idea, how would TP qualify for the 20% deduction? With 100K of 2% items, I would assume they are well above the 157/315K limit. Would his Sch C "business" have W-2 wages to support the 20%?

[KarenMM]

You are right - they are out!

Without even talking about all the others issues with this idea, how would TP qualify for the 20% deduction? With 100K of 2% items, I would assume they are well above the 157/315K limit. Would his Sch C "business" have W-2 wages to support the 20%?

There are so many moving parts to the new reg - I forgot about the 157/315k limit - they are out.... it was a bad idea anyway, since only family is involved, but I needed to go through the thought process to make sure.

Thanks to you both for your contributions!