Hello GreenTrader Tax,

I would like some advice on my situation which is similar to the original poster.

My friend and I went in together on a joint FXCM account. I am the primary account holder and my friend is the joint holder. We each deposited 50% of the balance... so we are 50/50 with each other.

Neither one of us actually trade the account as it is managed/traded by an outside trading company (via a client trading agreement and limited power of attorney). All the profits gained are split 50/50 with the company.

So ultimately the break down is 50% of the profits go to the company (listed as a "performance fee" in the client trading agreement) and 25% to me and 25% to my friend.

Here are my many questions...

How are the taxes broken down?

Are my friend and I each responsible for the taxes on our portion of the overall profits... in this case, 25% each? And the managing firm responsible for their 50%?

Or are we each responsible for 50% of the profits... then we each write off 50% of our individual profits (25% of the overall profit) as a performance fee?

Or am I responsible for 100% of the profits and then 50% is written off as a performance fee to the company? (Then the joint account holder just cuts me a check for the half of the taxes)

To further complicate the issue... no performance fee checks were written in 2007... as the split wasn't until Jan 2008. So for the 2007 taxes would this mean we are responsible for 100% of the profits?... Once again do we each list 50% profit on our taxes... or as the primary holder, I pay 100% then the joint account holder cuts me a check for half of the taxes?

After all the split stuff is figured out... where are the profits and things listed on the tax forms? (I think the performance fee doesn't come into play until 2008 taxes because the check was cut in Jan 2008... but where would it be listed also?)

A side question... Does it matter if the performance fee payment is pulled from the trading account or from like a savings/checking account? I don't think it does, but just curious...

Do you suggest forming an entity of some sort to make things easier? I will be more than happy to contact you directly via phone or email if you suggest it.

Thanks you very much in advance for shinning some light onto this situation.

Sincerely,

BenjaminB