Robert A. Green
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Customer Reviews:
Total reviews: 5
Average rating: 4.0 of 5
Read it before visiting your CPA 4 out of 5 stars.
51 of 55 people found this review helpful.
The book discusses issues that should be considered before filing as a trader. It also discusses factors that traders should consider before electing mark-to-market accounting. The guidance here is consistent with what I've read and heard from other credible sources.
A chapter is devoted to choosing the form of entity--single member Limited Liability Company, sole proprietor, etc. The book mentions several times that a tax professional should be consulted before selecting a form of entity for the trading business. This point cannot be overemphasized.
Another chapter includes the author's recommendations for establishing retirement plans that traders who have established a business entity may find useful. The book also discusses allowable deductions for traders.
The chapter on proprietary trading discusses considerations when trading a firm's capital instead of your own, and what to consider before associating with a firm as an employee or independent contractor.
For the most part, the book uses examples to illustrate key points effectively. The chapter on IRS audits includes a couple of cases studies--an audit of a part-time trader and an audit of an unprofitable trader. Illustrative Schedule Cs (Profit or Loss from Business)--for a sole proprietor and an LLC--are presented and discussed in some detail. The chapter on futures and commodities trading seemed to lack the level of detail that was present in other parts of the book, although it does provide a good overview of the relevant issues. As for taxation of equity, index, and ETF option trades, the book does not offer any guidance at all in this area.
The author is a CPA, and CEO of an accounting firm that provides services to traders and investors. This edition of the book was published in late 2004. Readers are invited to log on to the accounting firm's web site to get updates on issues that were not included in the print edition when it went to press. The web site also has links to journal articles published by the author that will be of interest to active traders.
I was somewhat bothered by the Introduction to the book, where the author appears to take a dim view of other tax professionals who serve trader/clients or want to get into the business of serving them. We are told, for example, that unless your local CPA or tax attorney handles "dozens" of traders, they probably will come up short in their advice to you." Dozens? Oh, come on now.
That said, I believe the book is a good starting point for active traders who are considering making a business out of it. With this information at hand, you should be able to ask good questions of your local CPA. He or she should be able to put you on the right path or, if appropriate, refer you to another tax professional with experience in this area.
Editorial Review:
Taxes play an integral role in trading success, yet no book today clearly and adequately explains the tax issues that are unique to active traders and investors. The Tax Guide for Traders provides traders with practical material on how to minimize the impact taxes have on their hard-won profits.
Written in a hands-on style that appeals to traders as opposed to accountants, it discusses the best ways to set up a trading business, key tax forms and how to use them, tax treatment for specific types of securities, what to do in case of an audit, and much more.
