Futures trading income as non-profit entity

stvmia
stvmia Member Posts: 5 Newcomer
in Income

I regularly day-trade and have resolved to donate a minimum of 51% of NIAT to 501c3 religious or educational entities. I would pay myself a 30% commission. Could I qualify this activity as a non-profit?

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Answers

  • zabostaxes
    zabostaxes Member Posts: 7 Level 2

    Hi stvmia,

    The short answer is no.

    Unless you have a legal trading business listed as a Non-profit, all of your income is considered as for-profit. Anything you donate will be counted towards the tax deduction.

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  • stvmia
    stvmia Member Posts: 5 Newcomer

    ok, but couldn't I set up a non-profit or trust foundation to donate, and pay myself a commission?

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  • stvmia
    stvmia Member Posts: 5 Newcomer

    I mean, my thinking is, if I'm essentially donating all income, why should I pay taxes on it…

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  • AlexO
    AlexO FreeTaxUSA Agent Posts: 74
    edited October 2023

    Hello, stvmia! That is a great question!

    While it's certainly a noble endeavor, it doesn't automatically qualify as a non-profit. This is true even if you plan to donate most of your earnings. As zabostaxes stated, you can claim donations to charities as an itemized deduction.

    You can review Chapter 1 of Publication 557 for additional information in applying for tax-exempt status. Of course, with something as complex as creating a tax-exempt organization, it would be advisable to reach out to a local tax professional with expertise in this niche tax topic.

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