Tax considerations in selecting commodity and securities trading entities

Article Abstract:

Investors concerned with entity choice and country of residence to minimize taxation of a stock investing subsidiary should be aware of the safe harbors available under IRC section 864(b)(2). The commodities trading safe harbor provides that persons will not be considered engaged in a trade or business in the US if they or their partnership limits their activities to commodities trading. The securities trading safe harbor is essentially identical to the commodities safe harbor, except that the taxpayer's principal place of business must not be in the US.

Planning, Stocks, Investments, International business enterprises, Multinational corporations, Corporations, international

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Derivatives trading now has a "safe harbor."

Article Abstract:

IRS proposed regulations under IRC section 864 contain new safe harbor rules for some foreign persons conducting derivatives trades in the US. The regulations would exempt income from such derivatives from US taxation if the trading is done by persons who are not dealers in derivatives or other securities and who enter into the derivatives contracts for their own account. The expansion of the safe harbor rules in this area is a welcome implementation of legislative intent.

United States, Tax Law, Public Finance Activities, Foreign investments, Derivatives (Financial instruments)

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Tax considerations in selecting commodity and securities trading entities and advisers

Article Abstract:

The courts have developed strict rules governing the IRC section 162 deduction of business expenses for securities or commodity trading partnerships based on trade or business status. Partnerships that contract out the fund management must show active oversight of the activities performed by the third-party advisers to be eligible for the deductions.

Laws, regulations and rules, Expense deductions, Passive activity (Taxation)

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