there is no substantial change in reported wealth apart from those estimated 150k new savings from income, meaning you have previously reported these 900k of expected capital gains as wealth and are not selling non-traded shares at a suddenly much higher valuation
this was really only for portfolio rebalancing and done in one or very few transactions and is a one-time event
this should not be an issue.
But, at this level of potential income with a six-digit tax impact, some cantons will certainly look closer and might want to discuss various details. This detailed assessment might end-up qualifying you as professional trader for other reasons.
How did you get to 900k of unrealized gains? RSUs/employer stock received over man years that you never sold until now? Not an issue. Heavy and successful trading over the past year(s)? You’re in for some trouble.
Yes it would break the safe harbor rule, but there’s no way this person is qualified as professional investor.
(I assume the 900k are just e.g. RSU or regular investments, not some very active trading¸and there is no drastic increase in wealth through trading, but even then only few cases would get classified as professional).
I’m not sure we’ve yet found anyone on this forum that got classified, and some people do very active trading incl. leveraged strategies.
Yes, this is all assuming no other rule got broken. But technically, NO rules are broken, as the capital gains are not used to replace the income due to full time employment. The employment income is enough to sustain the living. Is that right? The rule is super ambiguous.
Let’s say this scenario:
A person has been holding 200k of Ethereum for 3 years, no trading. 800k are other investments. Total net worth at the end of the year is therefore 1 million, wealth tax is paid.
Next year, Ethereum appreciates 10x to 2 million, the other investments appreciate 25% to 1 million. Total net worth 3 million.
Half of the Ethereum is sold, generating circa 1 million of capital gains. This money is rebalanced into other investments immediately, none of it is spent on lifestyle.
I find it really weird that it is taxed either at 0% or 45% (marginal income tax rate), and nothing in between, and you have no certainty which it is going to be.
Note that these numbers are hypothetical to better display the point and to have nice round numbers.
In my view, as long as the situation can be clearly explained and no financial product or financial arrangement has been put in place (i.e. gain solely on the capital gain and upside explosion of the asset in question), I see no risk in being classified as a professional investor.
An example along the same lines: when someone inherits a very large fortune in a direct line, for example, their status does not change. The comparison may not be exact, but the impact of the situation may be the same…
Exactly - case closed (on this single criterion) by applying common sense.
It can be assumed in all but very extraordinary cases: if capital gains are less than half of the income, they usually are not considered to substitute „normal“ taxable income.
Note that even when capital gains are substituting for other (taxable) income, you still will rarely be considered a professional trader. You may live from proceeds of selling assets without being taxed as a professional trader - exactly as you describe (you sell in one year).
I was reading this article (Taxes on Dividends and Capital Gains in Switzerland Explained - moneyland.ch) on private investor vs commercial investor status. I was just wondering : let’s assume that, some year, I make transactions that lead to me being classified as “commercial investor”. Is this a then permanent status, or does it apply only to the fiscal period over which the violation of the five rules happened ?
Please search the forum, this topic has been discussed many times. It’s not as simple breaching one of the rules and you suddenly become a professional investor. There are many people here incl. myself that breached one or even multiple rules for qualifying as a professional investor and none of us has been classified as such.
The tax authorities also have an interest in being careful whom they classify as professional, because you can then also claim your losses from your investments.
Sure, I understand this, and fully agree with you. But I’m just genuinely interested in my question: is it a status that is attributed once, or assessed yearly ? I couldn’t find any answer on this.
I doubt there are general rules (will depend on cantons anyway), and if you think you should no longer be treated as pro you can probably request a reassessment
You can give a call to your cantonal tax authorities (but given how hypothetical this is, I doubt it’s worth anyone’s time).
Hi, as a result from another question I posted, I was wondering if this rule “You hold your assets for over six months” can be ignored if the stock is sold for less than what I have paid. For example I bought Nio and don’t longer believe in it. I’m holding it since some months, but less than 6 months. Can this trade me anyway classify as a professionell trader?
It’s probably not a yes/no question and I would need to ask the tax department, but I thought I give it a try and it maybe is interesting for others as well. Thanks
Thanks and sorry if this has been already asked. I searched and found topics, but nothing that answers if selling with non profit would count towards that rule. I will search again, sorry.
From what I understand from reading the other posts it typically takes a lot more than just fulfilling one criteria of the list to be classified as a professional trader.
There are actually quite a few court cases where people have lost money day trading options. They sued to be classified as professional traders so they could deduct their losses. But the courts say that the activity was not aimed at making profits, as the losses show. Therefore, it cannot be considered a professional activity.
As far as I know that can’t be reverted. My losses are not high enough and the profits would be taxed. I think this only makes sense if you loose much more than your profit.
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