Legal Question in Tax Law in California

Taxation of forex trading revenues in offshore brokerage

Hi. I trade forex with a brokerage in Switzerland. They don't issue 1099's on their US clients and don't communicate with the US government about their clients (so they say). As of now I haven't paid any taxes on my forex revenues under the naive assumption that the US government doesn't know about me. I know this is illegal, though. I want to go legal and was hoping someone might have an idea about how to legally avoid paying taxes on these offshore revenues.

Thanks.


Asked on 9/05/04, 5:46 pm

1 Answer from Attorneys
Yaphett Powell Vubiquity, Inc.

Re: Taxation of forex trading revenues in offshore brokerage

Hello -

There are legal ways to help minimize your taxes on this income, but unfortunately, your Forex trading gains are taxable. Specifically, we can do things to affect the nature of your income (capital gains vs. ordinary income) and maybe reduce your overall tax (under IRC Sec. 988 provisions), but the gains will be taxable.

We can also perform certain entity formation strategies (to have the entities perform the trading), especially in Switzerland, which taxes corporations (located in the canton of Zuc) at very low tax rates.

Please give me a call if you would like to further discuss. This does not look good. The failure to pay tax in the past is of great concern, and we have experience putting taxpayers back in the system in a fairly painless manner (relatively speaking). I look forward to hearing from you.

Regards, Yaphett K. Powell Esq.

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Answered on 9/13/04, 3:38 pm


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