Investing

[antjraf]

Does simply investing in the stock market create a tax event? If we open an account without a SSN and fund it with verifiable lawful money, do we still create tax liabilty just by engaging in trade on the market?

I know that we must also have a clear understanding of whether or not we are a "taxpayer", but assuming we do, can we get caught in a contractual trap by purchasing securities, REITs, ETFs, MLPs?

From what I understand, a stock "certicate" is just color of title as with our automobiles or our homes (warranty deed). We really don't own these properties and as a result, we have a tax obligation to fulfill (real estate tax, yearly registration).

I am curious if anyone knows how to avoid this trap when investing.

[mertensv16]

Originally Posted by antjraf

Does simply investing in the stock market create a tax event?

No, except possibly for local excise taxes on the purchase or sale of securities. Check with your broker or your local tax authority. There's certainly no federal taxable event by merely investing.

If we open an account without a SSN and fund it with verifiable lawful money, do we still create tax liabilty just by engaging in trade on the market?

Good luck in opening a brokerage account without a SSN or taxpayer identification number. No reputable broker will do so, since it has reporting requirements under the law.

The only potential tax liability is if you sell securities for more than what you paid for them or if you receive dividends or interest on your investments.

From what I understand, a stock "certicate" is just color of title as with our automobiles or our homes (warranty deed). We really don't own these properties and as a result, we have a tax obligation to fulfill (real estate tax, yearly registration).

A stock certificate is evidence of your ownership of the shares it represents, and you own the shares just as you own your house or car. Unlike local real estate taxes, however, there's no federal tax on the mere ownership of securities, and there's certainly no annual registration requirement.

I am curious if anyone knows how to avoid this trap when investing.

There is no trap.

[psholtz]

Originally Posted by mertensv16

A stock certificate is evidence of your ownership of the shares it represents

A stock certificate is evidence of your "equity" ownership in the company, no?

Hence why they're called "equities"..

There a difference between owning an equity interest in something, and owning full title to something, is there not?

When push comes to shove, you'd probably find that the State "owns" the corporation you're buying shares in, since the State can ultimately revoke the corporate charter if it so desires.

The general trend in politics and government, it seems to me, is to divest the general public as much as possible from owning *anything* in full title, and simply giving them (if they behave themselves) an equitable interest in what was once their property by right (although that rant is probably a bit tangential to the issue of equities and stocks).

[psholtz]

Originally Posted by mertensv16

Good luck in opening a brokerage account without a SSN or taxpayer identification number. No reputable broker will do so, since it has reporting requirements under the law.

And that, I think, is the rub.

As near as I can tell from trying to parse the IRC, it's the SSN that creates the nexus between individuals and the income tax. If you get an SSN, you become a "taxpayer" and give the IRS full jurisdiction over all your affairs.. commercial and otherwise. If you get rid of your SSN, you become a "non-taxpayer" and outside their purvey.

So while the basic act of "investing" in the stock market may not create a taxable event, the capital gains realized from such investment is precisely the kind of "corporate gain" that the IRC is designed to regulate and tax.. and so, as you say, good luck trying to invest w/o a SSN.

[mertensv16]

Originally Posted by psholtz

As near as I can tell from trying to parse the IRC, it's the SSN that creates the nexus between individuals and the income tax. If you get an SSN, you become a "taxpayer" and give the IRS full jurisdiction over all your affairs.

You need to parse some more. A SSN is used as a reporting device; it doesn't create any type of nexus.

If you get rid of your SSN, you become a "non-taxpayer" and outside their purvey.

Nope. If you're (a) a U.S. citizen or a resident alien or (b) a nonresident alien who earns US-sourced income, you're subject to the federal income tax laws. How in the world do you think people got taxed before there were SSN's?

So while the basic act of "investing" in the stock market may not create a taxable event, the capital gains realized from such investment is precisely the kind of "corporate gain" that the IRC is designed to regulate and tax.. and so, as you say, good luck trying to invest w/o a SSN.

The gain isn't corporate gain, it's personal gain on the sale of stock. The increase in stock value needn't have anything to do with corporate profits. Look, Amazon.com lost money for 6 straight years before turning its first quarterly profit, yet during that same period, its stock price increased tremendously. Had you bought the stock when it first went public in 1997 and sold it just two years later, your investment would've increased 5640% even though the company was losing hundreds of millions of dollars.

And don't fall for the myth that the income tax reaches only corporate income -- that's the kind of thinking that put Irwin Schiff in the pen.

[antjraf]

Originally Posted by psholtz

And that, I think, is the rub.

As near as I can tell from trying to parse the IRC, it's the SSN that creates the nexus between individuals and the income tax. If you get an SSN, you become a "taxpayer" and give the IRS full jurisdiction over all your affairs.. commercial and otherwise. If you get rid of your SSN, you become a "non-taxpayer" and outside their purvey.

So while the basic act of "investing" in the stock market may not create a taxable event, the capital gains realized from such investment is precisely the kind of "corporate gain" that the IRC is designed to regulate and tax.. and so, as you say, good luck trying to invest w/o a SSN.

So the entire US stock market falls under the pervue of the IRC unless you take a loss? Doesn't seem right. If we can open a bank account without a SSN, why not an online brokerage account? No one can force you to use a SSN, financial intitutions are simply required to ask for it legally. Respond with a W-8 claiming non-resident alien status and the legal obligation is satisfied. It is then up to the individual to defend this claim if it ever comes up. The financial institution fulfilled its duty and has a record of it.

If, however, the mere participation in the stock market system creates an implied contractual nexus, or obligation to the IRC, then there lies the dilemma.

[netwrkranger]

Citizenship and Social Security create the nexus to income tax.

14th Amendment
Section 4: The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

Source: http://en.wikipedia.org/wiki/Social_...(United_States)
Social Security, in the United States, currently refers to the federal Old-Age, Survivors, and Disability Insurance (OASDI) program.

I'm seeing keywords of benefit, government insurance, and tax. The peg used to tie in all of one's financial accounts and transactions (for data gathering) is the SSN. Also, insurance (limited liability) means (implicitly) Admiralty jurisdiction as well as commerce (seeking profit).

Certificate of Stock see Certificate.

Certificate of Stock. A certificate of a corporation or joint-stock company that named person is owner of designated number of shares of stock. A written instrument stating or acknowledging that named person is owner of designated number of shares of stock. It is merely written evidence of ownership of stock, and of the rights and liabilities resulting from such ownership. It is merely a paper representation of an incorporeal right, and stands on the footing similar to that of other muniments of title.
- Black's Law Dictionary, 4th. Ed.

[psholtz]

Originally Posted by mertensv16

You need to parse some more. A SSN is used as a reporting device; it doesn't create any type of nexus.

If you don't have a reporting device, then there's no way to report anything.. LOL

Nope. If you're (a) a U.S. citizen or a resident alien or (b) a nonresident alien who earns US-sourced income, you're subject to the federal income tax laws. How in the world do you think people got taxed before there were SSN's?

Because I've read a letter from the SSA that says that if an individual has no SSN, then that individual would have no taxable income.

The SSN is what makes you a corporate instrumentality of the federal government, and thereby gives you an "income" in the sense of the IRC.

And don't fall for the myth that the income tax reaches only corporate income -- that's the kind of thinking that put Irwin Schiff in the pen.

Because Irwin Schiff had an SSN and therefore had a corporate income, as per the IRC.

[psholtz]

Originally Posted by antjraf

So the entire US stock market falls under the pervue of the IRC unless you take a loss? Doesn't seem right.

Corporate profits and gain, capital gains, etc are (in a broad sense) what puts you under the pervue of the IRC.

If we can open a bank account without a SSN, why not an online brokerage account?

I think you can (technically) only open non-interest bearing bank accounts w/o a SSN.

If you want a savings account, or something that pays a capital gain, you still need a SSN.

And that's what a brokerage account is: it's a device for realizing capital gains.. thus it would (should) in general carry an SSN (or other taxpayer ID) obligation.

No one can force you to use a SSN, financial intitutions are simply required to ask for it legally.

Perhaps.. but then conversely nothing is forcing that financial institution to accept you as a customer either.

[mertensv16]

Originally Posted by psholtz

If you don't have a reporting device, then there's no way to report anything.. LOL

You must have misunderstood -- I was talking about whether something was legally taxable without regard to a SSN. You're talking about whether you'll get caught by not reporting income.

Because I've read a letter from the SSA that says that if an individual has no SSN, then that individual would have no taxable income.

Whoever wrote that is incredibly wrong. Look in the Code. See if you can find anything that says that unless you have a SSN, you have no taxable income.

The SSN is what makes you a corporate instrumentality of the federal government, and thereby gives you an "income" in the sense of the IRC.

And you have legal authority to support this astonishing claim???