Treatment of Delaware LLC for Capital Gains Tax purposes

[DonkeyAccountant]

Mr Z set up a Delaware LLC in the US which bought a lot of shares overseas. The company sold the shares and generated huge capital losses (and very small capital gains).

Mr Z argued his Delaware LLC was effectively a bare trust of which he was a beneficiary. As a result, he should report the capital gains or losses on his SA100 and set the losses against the gains on the disposal of shares he owned personally.

Was Mr Z right in treating his Delaware LLC as a bare trust?

(In the US, the income and gains of a Delaware LLC are usually treated as if they belonged to the owner. However, HMRC may prefer to treat it as a separate taxable entity, separated from its owner.)

[pawncob]

Why did he set up a LLC? Answer: To avoid liability which might attach to HIM.

He can't claim the losses personally, the belong to the company. He could however sell the company at a loss and claim that loss!