SPXL and taxes if held over years

Taxes
1

Hello fellow FI people.

I have a specific question: If you trade leveraged financial instruments you will be classified as a trader and will have to pay taxes on any profits you make on stocks. Is this also true for leveraged ETFs like SPXL and TQQQ?

If yes, are you classified as a trader only in the year you sell SPXL (if you were to hold it for years) or in all years you hold it?

Any input is much appreciated.

Mat

2

Where did you read that? It’s not as simple as this.

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4

I google it.
for instance on the postfinance website it states:

Five key criteria that qualify you as a private investor

As a private investor, you must meet the following criteria for the relevant tax authorities to classify you as a private asset manager. Please note these tips only apply within the context of classification by the tax authorities, and should not be viewed as general (investment) recommendations.

  • You hold your assets for over six months: this criterion is usually met because, as a private investor, you’re likely to hold your assets for longer than 6 months in any case.
  • The correct ratio between capital gains and net income: your capital gains should not exceed 50% of your net income.
  • The correct ratio between transaction volume and portfolio value: the transaction volume you handle on an annual basis should not exceed five times the value of your portfolio. If, for instance, your portfolio is worth CHF 10,000, the transaction volume from buying and selling your shares should not exceed CHF 50,000.
  • You use your own capital to invest: as a private investor, you should generally trade with your own money, and not trade on credit (e.g. with lombard loans).
  • You don’t use derivatives (except to hedge your securities against exchange losses): buying and selling derivatives (options, especially) may lead the tax authorities to assume that you‘re a commercial trader in securities. Derivatives for hedging your securities against exchange losses are, however, an exception.
5

If you don’t satisfy a criteria, it doesn’t mean you become classified as professional. (You can search the forum it’s been discussed many times).

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I would still be interested in knowing if there is anyone out the with experience in holding leveraged ETFs and the consequences concerning taxation. Anyone?

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I don’t use leveraged ETFs, but I buy securities on margin and many others here do it as well and none of us have been classified as professional investor.

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@Burningstone I have also started buying stocks on Margin at IBKR. When you do the tax declaration at year end, do you list the margin Postion ex. - XX,XXX USD cash?

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a) i’m not sure if leveraged etf’s are considered as derivatives re pro trader status. i did hold such etf’s for a few months last year (without consequences).

b) those 5 criteria are the save haven ones, i.e. you’d be 100% safe even if the tax guy personally hates you. i’ve (at least partially) violated against 3 of them for the past ~three years (without consequences to date).

c) you’d not be classified on a year by year basis.

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Yes, I list it as a debt. You can even deduct the interest you pay on the loan.

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