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Synopsis:
Keep the profits you work so hard to earn and take control of your financial destiny with this thoroughly updated guide to reducing tax liability for the serious trader and investor. Jam-packed with invaluable business, estate, retirement planning, and tax-saving strategies that virtually anyone can implement within the new tax laws, CPA and expert tax consultant Ted Tesser provides current solutions for the tax problems most U.S. traders, investors and income earners are facing today. Comprehensive and simple to use, this complete guide includes not only proven methods to reduce your tax exposure, it comes with real-world case studies, illustrations, templates, and filled-out, ready to be filed tax forms. Whether you are looking for last minute tax-saving tips or trading techniques that position you for the optimal tax reduction, The New Trader's Tax Solution is a must-have to any trading library.
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Jacket Description:
The Thoroughly Updated Guide to Reducing Tax Liability for the Trader and Serious Investor
What would you do to increase your trading profits by as much as 50%? Most traders and investors would do whatever it takes. Those same traders will much to often what the profits earned with their blood, sweat and tears shrink considerable as they prepare their tax returns. You have in your hands the easy-to-use tools that will protect your hard earned assets. Packed with proven strategies that reduce your tax exposure this comprehensive guide is completely updated with information and strategies for the most recent tax changes.
Here are invaluable business, estate, retirement planning, and tax-saving strategies that virtually anyone can implement within the new tax laws. It is simple to use and includes specific information to help traders reduce their tax liability, with individual case studies, real-world examples, and model tax returns. CPA and expert tax consultant Ted Tesser provides current solutions for the tax problems facing most U.S. traders, investors, and income earners today—excessive tax payments to federal and local governments, insufficient preparation for retirement, and , ultimately, the fate of bequests. In this book, Tesser shows everyone concerned:
-How to disinherit the federal government
-How Trader Status is upheld, even under audit
-How to augment underfunded retirement plans
-How to master the basiscs of estate tax planning
-How to integrate the “triple crown”—Tesser's latest strategy for tax avoidance and wealth accumulation—into your trading plan
…and much more.
Keep the profits you work so hard to earn, whether from trading, investing, or hard work—and take control of your financial destiny. The NEW Trader's Tax Solution has puts years of experience at your fingertips.
With the “triple crown,” you will learn how to unleash the full power of Trader Status by combining it with a Trading Entity. You will also learn how to establish a Wlfare Benefit Trust to accomplish all these goals and more. This program enables you to take advantage of little known facets fot he tax law that have been on the books for almost three-quarters of a century. You'll learn how to:
-Contribute and deduct substantial amounts of money over any period of time
-Grow the principle in a fully tax-defered, 100% secure environment
-Access the money at a future date, not limited by age, income, or retirement plan status
-Avoid the restrictions of ordinary retirement plans by using the same techniques that have been used by America's largest corporations since 1928
Whether you are looking for last minute tax saving tips or trading techniques that position you for the optimal tax reduction, The NEW Trader's Tax Solution is a must-have addition to any trading library.
Get the government to pick up the tab on this years trading profits, foot the bill for any trading losses, and increase your wealth by 50%, instantly. After putting Trader Status on the map, Tesser now takes it to another dimension, complete with real world case studies, illustrations, templates, and filled-out, ready to be filed tax forms.
Ted Tesser, CPA, is a partner with Tesser, Horowitz, and Ullmann, Inc. 1-800-556-9829, a firm serving clients around the world. He specializes in investment taxation, is an active trader, and is the author of Trader's Tax Survival Guide and the best-selling video Cut your Trading Taxes in Half!
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Table of Contents:
Acknowledgments xiii
Introduction: We Are All Traders! 1
1 The Basics of Accumulating Wealth and Keeping It 3
The Foundation-Things You Need to Know 3
The Basics of Tax Planning 3
Red, Gray, or Black-and-White? Choose Your
Tax Strategy 4
There Is No Mystery to Saving Taxes 7
The Paradigm Shift to Tax Freedom 8
2 The Trader's Tax Solution 9
There's Too Much Tax . . . Here's What You Can Do
about It 9
"Thanks a Million, Uncle Sam." (Or Should I Say
$89,500.49 after Taxes!) 11
Does Anyone Feel Morally Obligated to Pay the
Maximum Income Tax? 12
How to Direct the Government in Your Best Interests 13
Investors Are Hit Particularly Hard 16
The Government's Free Lunch-Your Tax Return! 17
Starving the Government-Trader Status 17
Investor, Trader, or Broker-Dealer/Market Maker-
What's the Difference? 18
You May Be a Trader and Not Know It! 20
Case in Point-Was Louis Yaeger a Trader? 22
What This All Means 25
Schedule C-Born to Be Filed 26
Other Benefits of Claiming Trader Status 28
It's Your Business-Why Not Deduct It? 29
3 Recent Trader Cases 47
The Case of Fredrick R. Mayer 47
The Case of Rudolph Steffler 53
The Case of Stephen A. Paoli 54
Trader Status-Other Cases 56
4 The 1997 Trader's Tax Act-The Most Significant Changes
for the Trader and the Investor since 1986 58
The Top 10 List of Things to Know 58
Section 475 for Traders of Their Own Accounts 64
Summary and Conclusion 68
5 The Triple Crown 69
The Most Effective Tax-Saving Strategy I Have
Ever Known 69
Step 1-The Business 69
Step 2-The Entity 75
Step 3-The Voluntary Employee Benefit Association 97
The Triple Crown 111
6 Providing for a Wealthy Retirement 112
The Big Boom of 50-Year-Olds! 112
Life's Tough and Then You Retire-How to Make It Easy 114
Denial Is Not a River in Egypt 115
See No Evil, Hear No Evil . . . Opening Your Eyes 115
And the Walls Come Tumbling Down-the Pillars of
Retirement Planning 118
The Tax Factor 119
Paying My Fair Share Does Not Mean the Maximum
Tax I Can Pay 120
What Lies Ahead-and How Will It Affect Your Retirement? 121
The Crumbling Pillars 121
Conclusion: The 10 Deadly Sins of Retirement Planning 127
7 They Don't Make Hearses with Luggage Racks 129
The Last Laugh 129
Estate-Tax Planning 101: The Basics 131
The Unified Gift and Estate Tax 131
Multiple Choices-A Career in Government or a
Career in Government? 136
A Typical Estate 136
Your Retirement Plan Gets Hit Worse 137
Conclusion 142
8 Income and Expenses: A Review 144
Income Defined 144
Earned and Passive Income versus Investment Income 148
Unlimited Gains/Limited Losses 149
Unlimited Income/Limited Expenses: The Pig and His Pal 150
What Is an Expense? The "Four Criteria Deduction Test" 150
Total Return Investment Plan (TRIP) 151
Calculation of True Yield 152
The Risk/Reward Ratio Revisited 156
Risk/Reward Ratio Meets the "Tax Factor" 158
9 New World Retirement Planning 162
Individual Retirement Accounts 162
Simplified Employee Pension Plans 164
Qualified Retirement Plans (KEOGHs) 165
10 New World Estate Planning 170
Using the Annual Gift-Tax Exemption 171
Using Estate-Tax Planning Strategies 173
Other Considerations in Addressing Estate-Tax Planning 174
Sixteen Crucial Definitions 179
11 The Double Play: To Give Is But to Receive! 183
Background 183
To Further Compound the Situation 189
A CRT and Your Heirs 190
A Crummey Trust Is Not So Crummy! 191
To Gift Is But to Receive 192
Prepay Your Estate Tax for Pennies on the Dollar 193
The Double Play-Summary 196
12 The Layup: It's Just a Matter of Trust 197
How and Why to Set Up a Trust 197
The Layup-Summary 201
13 The Home Run: A Way to Double Your Exemptions 202
The Basics 202
The Home Run-Summary 203
14 Modern-Day Miracles-Chalk Up a Few for the
Good Guys 204
Trader Status Audit Victories I Have Had 204
What We Can Learn from All of This 218
15 Knowing Your Limits: How Far Can You Go? 220
Question of Legality 220
"Only the Little People Pay Taxes" 221
How the IRS Builds a Criminal Case 222
The Taxpayer Bill of Rights 224
Specific Mitigating Circumstances 226
Your New Rights as a Taxpayer 229
Significance to the Investor and the Trader 230
Michael Milken 233
How to Play for Keeps with the IRS 233
What Criteria Are Most Important in the Selection of
Tax Returns for Audit? 234
Types of Audit-Selection Processes 236
Ten Ways to Reduce Your Chances of Being Audited 237
Playing in the Major Leagues with the IRS 242
Audit DO's and DON'Ts 243
Other Winning Audit Techniques 246
16 101 Tax-Reduction Strategies 250
Conclusion 280
Appendix A Investment/Trading Vehicles and
How to Report-Tax Consequences 281
Stock 281
Equity Options 282
Index Options and Futures Contracts 283
U.S. Treasury Bills 284
Treasury Notes 284
U.S. Savings Bonds 285
Municipal Bonds 285
Nikkei Put Warrants 286
Calls or Puts on the FTSE 100 286
Stock Dividends 286
Return of Capital 287
Dividend Reinvestment 287
Mutual Fund Switch from Equity to Cash 288
Short Sales of Stocks and Shorting against the Box 288
Incentive Stock Options 289
Appendix B Deductions Related to Investment and
Trading Activities 291
Commissions 291
Carrying Charges 291
Deductions of Investors 292
Dealers, Traders, and Hedgers 292
Common Deductible Expenditures 293
Appendix C The VEBA-Code Sections 294
Section 501 294
Internal Revenue Regulations 1.501(c)(9)-1 294
Internal Revenue Regulations 1.501(c)(9)-2 295
Internal Revenue Regulations 1.501(c)(9)-3 296
Internal Revenue Regulations 1.501(c)(9)-4 297
Internal Revenue Code Section 162(a) 297
Internal Revenue Regulations Section 1.162-10(A) 298
Internal Revenue Code Section 419(e) 298
Internal Revenue Code Section 419(A)(f)(6) 298
Internal Revenue Code Section 505(b) 298
Appendix D The VEBA-Court Cases 300
Greensboro Pathology Associates, P.A. v. U.S., 698 F.2d 1196,
83-1 USTC
9112 (Fed. Circuit 1982) 300
Bricklayers Benefit Plans of Delaware Valley, Inc. v.
Commissioner, 81 TC 735 (1983) 300
Water Quality Association Employee's Benefit Corporation
v. U.S., 795 F.2d 1303, 86-2 USTC
9527 (7th Cir. 1986) 301
Sunrise Construction Company, Inc. v. Commissioner,
52 TCM 1358, T.C. Memo 1987-21 (1987) aff'd.
(9th Cir. 1988) unpublished opinion 301
American Association of Christian Schools Voluntary
Employees' Beneficiary Association Welfare Plan Trust
v. U.S., 663 F.Supp. 275, 87-2 USTC
9328 (M.D.Ala. 1987), aff'd. 850 F.2d 1510, 88-2 USTC
9452 (11th Cir. 1988) 302
Wade L. Moser v. Commissioner, 56 TCM 1604 (1989),
aff'd. on other issues, 914 F.2d 1040, 90-2 USTC
50,498 (8th Cir. 1990) 302
Lima Surgical Associates, Inc., VEBA v. U.S., 20 Cls.Ct. 674,
90-1 USTC
50,329 (Court of Claims, 1990),
aff'd. 944 F.2d 885, 91-2 USTC
50,473 (Fed.Cir. 1991) 303
Joel A. Schneider, M.D., S.C. v. Commissioner, 63 TCM 1787,
T.C. Memo 1992-24 (1992) 304
Harry Wellons, Jr., M.C., S.C. v. Commissioner,
643 TCM 1498, T.C. Memo 1992-74 (1992),
aff'd. 31 F.3d 669, 94-2 USTC
50,402 (7th Cir. 1994) 304
General Signal Corporation v. Commissioner,
103 TC #14 (1994) 305
Prime Financial Cases 305
Conclusion 309
Appendix E Other VEBA Rulings 312
Private Letter Ruling-9115035-1991 312
Private Letter Ruling-9401033-1994 312
Private Letter Ruling-9406008-1994 313
Private Letter Ruling-9414011-1994 313
Private Letter Ruling-9438017-1994 314
Private Letter Ruling-9446036-1994 314
Private Letter Ruling-9505019-1995 315
General Counsel Memorandum-39052-1983 315
General Counsel Memorandum-39440-1985 316
General Counsel Memorandum-39774-1988 316
General Counsel Memorandum-39818-1990 316
Appendix F 166 Frequently Asked Questions
and Answers 318
Appendix G Trader Tax Return Examples and the
475 Election 350
Preparing Your Own Tax Return Is Like Performing
Open Heart Surgery on Yourself-But if You Insist. . . . 350
How to Elect Mark-to-Market 353
Section 481 Adjustment 354
Appendix H Logs and Journals 468
A Simple System 468
Contemporaneous Logs and Journals 470
Appendix I It's All a Matter of Time
(The Reality of the Wash Sale Rule) 511
Appendix J Trader Evaluation Questionnaire 515
Notes 519
Disclaimer 523
About the Author 525
Index 527
Additional Resources 541
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Review:
PRAISE FOR PREVIOUS EDITIONS
“Here's my advice: first, design a trading strategy that gives you an edge in the markets; second, trade your strategy with precision and steadfastness; third, study The Trader's Tax Solution and apply Tesser's principles to your taxes and financial planning. If you're a trader or investor who wants to keep the maximum possible amount of the money you've earned, your copy of The Trader's Tax Solution will be worth its weight in stock certificates!” – Thomas A. Bierovic, Manager, Strategy Testing & Development, Omega Research, Inc.
“I have heeded Ted Tesser's advice for many years. His background, knowledge, and experience have been invaluable in saving me an enormous amount of money over the years. This book is my bible for financial and tax strategies.” – Bill M. Williams, PhD, CTA, Professional trader and President, The Profitunity Trading Group
“Taxes can be the largest single expense for a successful trader. Ted Tesser draws on his experience as both a CPA and successful trader to show you how to minimize this expense. This book is clearly written, practical, and comprehensive. Deserves a place on every trader's bookshelf.” – Sheldon Knight, President, K-Data, Inc.
“Ted Tesser is one of the nation's foremost experts on investment taxation. In this definite guide to reducing and even eliminating whole classes of tax exposure, Ted presents a wealth of solid tax strategies that investors and traders will find indispensable.” – Nelson Freeburg, Editor, Formula Research
“Ordinarily a ho-hum subject, Tesser has made reading about taxes for traders enjoyable. This book is not only a fun read, it is an invaluable reference. The Trader's Tax Solution contains everything a trader needs to know about taxes.” – Sunny J. Harris, President, Sunny Harris & Associates, Inc., Author, Trading 101: How to Trade Like a Pro, Trading 102: Getting Down to Business, and Electronic Day Trading 101
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