QUESTION
How can I protect myself from tax liabilities for transferring someone else's money?
Asked on Apr 08th, 2014 on Taxation - Michigan
More details to this question:
I am located in the US and a friend of mine is in Canada. He would like to profit from price discrepancies between the two currencies in certain markets (arbitrage). We would transfer his money through my account here to sell/buy in the US before sending the money to his account in Canada. How do I separate his money from my income, and protect myself from being liable for taxes on his money?
3 ANSWERS
Commercial & Bankruptcy Law Attorney serving Powell, OH
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Ronald K. Nims
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Set up an LLC or corporation as owner of the US bank account. If the account is opened under your social security number, it will appear that you're profiting in the Fx transactions. In addition, having bank accounts in your name and social security number with other people's money in them is playing with money laundering. That might attract attention that you don't want.
Answered on Apr 10th, 2014 at 6:47 AM
Taxation Law Attorney serving Glendale, CA
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Irsfeld, Irsfeld & Younger LLP
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Have a written contract, AND use his taxpayer identification number on the accounts.
Answered on Apr 09th, 2014 at 8:42 PM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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Would suggest you take this arbitrage scheme and rented by a local attorney or tax accountant. I do not believe that there is any restriction or additional cost if your friend were to open his own US account, or you are to open a separate account which would be only used for these transactions and therefore easy to account for. If you are doing this for free, I don't understand why you are bothering. If you are being paid to do it, you have income too.
Answered on Apr 09th, 2014 at 7:54 PM