Stocks under scorp

[TAX]

Client has setup, single person, S corp in 2006. He buys and sells stocks under s corp name.

(1) Can he deduct stock loss from s corp as an ordinary on his personal return?
He did put in $50,000 as a loan to business (In another words, He does have basis)

(2) Does it make any difference whether you buy stock under scorp or personal name?

(3) Can he claim Trader status (He does work as Manager in a store)

Thanks!

[BOB W]

Client has setup, single person, S corp in 2006. He buys and sells stocks under s corp name.

(1) Can he deduct stock loss from s corp as an ordinary on his personal return?
He did put in $50,000 as a loan to business (In another words, He does have basis)

NO>>>>>>>> ORDINARY LOSSES CAN ONLY BE TAKEN IF HE QUALIFIES FOR THE MARK-TO-MARKET ELECTION. DOING THIS MAKES ALL PROFIT ORDINARY INCOME AS WELL. IN OTHER WORDS, NO MORE CAPITAL GAINES. REVIEW SCHEDULE D INSTRUCTIONS.


(2) Does it make any difference whether you buy stock under scorp or personal name?

NOT REALLY> THIS WILL BE A PASS-THROUGH -ENTITY

(3) Can he claim Trader status (He does work as Manager in a store)

HE CAN BE A QUALIFIED TRADER AND TAKE OPERATING EXPENSES AT THE SCORP LEVEL, IF HE QUALIFIES. BUT STOCK TRANSACTIONS WOULD STILL GO ON 1120S SCHEDULE D AND PASSED THROUGH TO 1040 SCHEDULE E>D. CHECK WITH SCHEDULE D INSTRUCTIONS FOR QUALIFICATIONS ( IT HAS BEEN A WHILE SINCE I REVIEWED THOSE INSTRUCTIONS.

NOTE:
If he was a 1040 Schedule D, and qualifies as a trader (not mark to market), he could of put his expenses on 1040 Schedule C.

[erchess]

Why are his

investments in the form of an S Corp instead of a C Corp?

[BOB W]

investments in the form of an S Corp instead of a C Corp?

As a C Corp all activity would be locked into a taxable entity. Profits and Losses would not go anywhere. Not a good choice.

As an S Corp it is useless for tax purposes, Schedule D and Schedule C (if qualified) would of done the same thing. The S Corp does nothing unless it would qualify as a trader, thus giving operating expense deductions just like 1040 Schedule C.

Overall, Incorporation was a waist of money for this activity. Unless the trader was looking for a shield to hide behind and take deduction that would never qualify on a 1040. Thus taking the audit lottery to another lower level of risk

[TAX]

Client has setup, single person, S corp in 2006. He buys and sells stocks under s corp name.

(1) Can he deduct stock loss from s corp as an ordinary on his personal return?
He did put in $50,000 as a loan to business (In another words, He does have basis)

NO>>>>>>>> ORDINARY LOSSES CAN ONLY BE TAKEN IF HE QUALIFIES FOR THE MARK-TO-MARKET ELECTION. DOING THIS MAKES ALL PROFIT ORDINARY INCOME AS WELL. IN OTHER WORDS, NO MORE CAPITAL GAINES. REVIEW SCHEDULE D INSTRUCTIONS.


(2) Does it make any difference whether you buy stock under scorp or personal name?

NOT REALLY> THIS WILL BE A PASS-THROUGH -ENTITY

(3) Can he claim Trader status (He does work as Manager in a store)

HE CAN BE A QUALIFIED TRADER AND TAKE OPERATING EXPENSES AT THE SCORP LEVEL, IF HE QUALIFIES. BUT STOCK TRANSACTIONS WOULD STILL GO ON 1120S SCHEDULE D AND PASSED THROUGH TO 1040 SCHEDULE E>D. CHECK WITH SCHEDULE D INSTRUCTIONS FOR QUALIFICATIONS ( IT HAS BEEN A WHILE SINCE I REVIEWED THOSE INSTRUCTIONS.

NOTE:
If he was a 1040 Schedule D, and qualifies as a trader (not mark to market), he could of put his expenses on 1040 Schedule C.

Thank you. I agree. That is why I told him to close his scorp. He did close it in 2007.

(1) I still have to report stock sale transactions before closing.

(2) What about his expenses such as supplies etc.

(3) What do you put down as a business activity and business code? He did not have any other activity.