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maxreturn
745 posts
msg #55574
Ignore maxreturn
modified
10/8/2007 8:49:13 AM

I have a friend who just came into a nice sum of money. He's asked me to trade a small portion of it...about $10,000. In exchange I will earn a percentage of the profits. I've never done this sort of thing before and I want to structure this thing as simple as possible while getting maximum tax benefit. Anyone out there have any suggestions?

roheba
20 posts
msg #55576
Ignore roheba
10/8/2007 11:44:36 AM

Your fee is going to be ordinary income, so I don't think there's much you can do regarding tax treatment. A simple arrangement I've used is: 40% of gain in excess of the concurrent change in the S&P. So, if you achieve 25% while the S&P has gone up 15%, you get paid 40% of 10%. Given this circumstance, at the end of the year, your friend's account grew by $2,100 and you pocketed $400. Professional money managers work for lower percents, but with much larger account balances.

maxreturn
745 posts
msg #55577
Ignore maxreturn
10/8/2007 11:53:38 AM

Roheba, thanks for the response. We've already worked out the fee arrangement. I should have been more specific. I'm looking for advice as to whether or not it would make sense to form a trading company and either incorporate or set up an LLC to gain maximum tax benefit.

Regards
Max

StockFetcher Forums · General Discussion · Trading & Taxes<< >>Post Follow-up

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