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From what I understand, you need to trade full-time in order to deduct educational related trading expenses such as magazines, courses, or newsletter subscriptions. If I'm not a full-time trader but create an LLC that has its own bank account and trading account under the LLC, can the above type of educational expenses then be deducted?

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    A comment/observation. An LLC is a pass thru entity. I'm not aware of it providing changes to taxation as you're seeking. But someone more knowledgeable might have a better real answer for you. – JoeTaxpayer Apr 13 '14 at 18:41
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A single member llc is a tax nothing, a disregarded entity that does not affect tax filing unless you elect to pay entity/corporate tax. It will not alter your status or increase your reach.

The rules to deduct expenses stem from IRC §212 and Reg §1.212-1, and are partially explained in Pub 550 and Pub 535. The llc will get these deductions if you check the box with Form 8832, but it will then be paying corporate tax. You may also hit certain tax rules for investment companies or Personal Holding Companies.

Note that an LLC will not be taxed at a beneficial capital gains rate.

  • What do you mean by "beneficial capital gains rate"? – 4thSpace Apr 13 '14 at 23:41
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    @NL7 - excellent. I have an LLC, and my purpose was to limit my personal liability as the acronym implies. Nice answer, keep them coming. – JoeTaxpayer Apr 14 '14 at 0:05
  • @JoeTaxpayer: As it seems I can't deduct educational related expenses, personal liability was the other deciding factor for putting together the LLC. It's enough alone to form the LLC. – 4thSpace Apr 14 '14 at 0:08
  • @4thSpace - Income is generally grouped into "ordinary income" and "capital gains." For individuals in the US, the normal long-term capital gains tax rate tops out at 20% (previously 15%). There are multiple different CG rates, such as short-term, collectibles, QSBS, etc. Corporate taxpayers still have capital gains, which track separately from their ordinary income, but they do not receive a preferential rate. They pay the corporate rate on both OI and CG. – NL7 Apr 14 '14 at 0:32
  • @4thSpace - I wouldn't say that investor education is necessarily not deductible. You should dive into it and then consult a CPA or tax lawyer. I saw some stuff suggesting that travel, publications, and maybe education could be investment expenses, but I did not look at the details. There are probably Revenue Rulings or court cases on point. IRC §212 is the relevant code section. – NL7 Apr 14 '14 at 0:34

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