Tax loss carryforward after going broke in trade?

Discussion in 'Taxes and Accounting' started by OptionFool, Sep 12, 2020.

  1. Assume you had a $1 million trading account and you blew it up and lost $1.5 million and owed your broker $500k which you cannot pay and have to declare bankruptcy. When you list your trades on your taxes do you show a loss of $1.5 million and thus have a $1.5 million tax loss carryforward, or do you make an adjustment of 500k and just show a loss of $1 million since that is your only out of pocket loss? If so, how do you describe this adjustment? Can this adjustment be made before the discharge of the 500k judgment? Or should it be done afterward in a future year to lower your $1.5 mil capital loss carryforward down to $1 million? (and hope you live 333 more years to use it all up) :-(
     
  2. F
     
  3. SunTrader

    SunTrader

    If this is a serious issue for you (or someone you know) the serious answer is to ... ask an tax accountant, not fellow traders.
     
    bone and HomelyWizzard like this.
  4. destriero

    destriero

    If the mil involved zero capital gains (you depo $1MM) then it's a loss of 1.5MM carried.
     
  5. No prob you get to deduct $3k/yr and net the other -$1,497,000 against cap gains....For. Fkin. Ever.

    Gotta luv our tax laws.
     
    vanzandt likes this.
  6. destriero

    destriero

    Deduct $3K each year in perpetuity. Dude going to live 499-n years?

    I know a guy who made 1MM playing poker one year, lost 1.2MM the following year in a single 100/200 NLHE HU game.
     
  7. SunTrader

    SunTrader

    If classified as a trader, and not an investor, losses are basically considered expenses applied against income and not limited to $3k/year deduction.
     
    destriero likes this.
  8. Overnight

    Overnight

    Scary stuff.
     
  9. destriero

    destriero


    He thought the following years loss was deductible in full against the previous year's gains. Wheeeeee.
     
  10. I would suggest that person contact www.greentradertax.com


     
    #10     Sep 12, 2020