Trading Futures in Canada - Dual Citizen

[StefanMHofer]

Hello,

I am dual citizen (American and Canadian) living in Toronto,Ontario and will begin trading futures contracts on worldwide exchanges. I am researching tax strategies to mitigate taxes on capital gains.

My understanding of Canadian taxes is that half of the capital gains is taxed as income earned from trading futures as a speculator e.g. I trade corn futures and realize a gain of $1,000, only $500 is taxed at the marginal rate. Also, if I were to create an investment partnership “LPâ€￾, the entire capital gain is taxed as income earned from trading futures. In Canada it seems trading futures as a speculator has favorable tax treatment. http://www.cra-arc.gc.ca/E/pub/tp/it346r/it346r-e.html

My understanding of American taxes is that the entire capital gain is taxed as income earned from trading futures. Also, if I create a business structure i.e. LP, LLC, Sole Proprietorship, the entire capital gain is taxed as income earned.

It appears beneficial to trade futures as a speculator under the Canadian tax regime, but since I am an American citizen, I am required topay income taxes on my worldwide income.

1) When the IRS taxes on worldwide income, does this negate the 50% capital gains treatment in Canada because I would be forced to pay taxes onthe other 50% in the U.S?

2) Is it recommended that I setup an investment business structure in Canada or the U.S. to mitigate taxes?

3) Finally, I also earn income in Canada as a sales associate. Would it be smart to setup an investment business structure to prevent my personal income increasing into higher income tax brackets, thus protecting the capital gains earned by subjecting them to a lower tax bracket?

Your insight and knowledge are most appreciated.

SMH