Capital Gains and Losses

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I'm a non-resident alien and have several stock trading

I'm a non-resident alien and...
I'm a non-resident alien and have several stock trading transactions on Robinhood. I wonder if the capital gain is considered as ECI?
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3/23/2018
Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Capital Gains and Losses
Satisfied Customers: 2,762
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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Hello!

My name is***** will assist you today.

Please give me one moment while I review your question and type my initial response

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You must be engaged in a trade or business during the tax year to be able to treat income received in that year as ECI. ---Trading stock would not count as effectively connected income.

___

Certain kinds of Fixed, determinable, annual or periodical income are treated as ECI income because.

  • Certain Internal Revenue Code Sections require the income to be treated as ECI,
  • Certain Internal Revenue Code Sections allow elections to treat the income as ECI,
  • Certain kinds of investment income are treated as ECI if they pass either of the two following tests:
    • The Asset-Use Test - The income must be associated with U.S. assets used in, or held for use in, the conduct of a U.S. trade or business.
    • Business Activities Test - The activities of that trade or business conducted in the United States are a material factor in the realization of the income.
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Below is a link to IRS.Gov which specifically states that you are NOT engaged in a trade or business in the US if you are trading stocks, securities or commodities.

https://www.irs.gov/individuals/international-taxpayers/effectively-connected-income-eci

"NOTE: If your only U.S. business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U.S. resident broker or other agent, you are NOT engaged in a trade or business in the United States.

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Please let me know if this has answered your question or if you have any additional questions.

When you have no further questions a positive rating of 5 stars is much appreciated.

Thank you!

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Customer reply replied 4 months ago
How is "only U.S. business activity" interpreted? I receive W2 from my work. Does that make stock trading NOT the only US business?

You usually are considered to be engaged in a U.S. trade or business when you perform personal services in the United States. Whether you are engaged in a trade or business in the United States depends on the nature of your activities.

Chad EA, CDFA®, CFP®
Chad EA, CDFA®, CFP®, CERTIFIED FINANCIAL PLANNER ®, Professional
Category: Capital Gains and Losses
Satisfied Customers: 2,762
Experience: IRS Licensed Enrolled Agent, CDFA ® CFP ®, MBA
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