You need to consult with a bankruptcy lawyer before you pull the trigger on that idea, because it will haunt you for 10 years from date of judgement. It might be better for your credit to have a 1.5 mil debt on file, than a bankruptcy of 1 million. If you manage to repay that debt in, say, 5 years, then your file can be wiped clean. No more debt. But a personal bankruptcy will follow you for 10 years, no matter how many millions you earn later and pay off said debt. You have decisions to make. Explore your options before deciding on a court date.
If the 500k owed the broker is forgiven I think it can be considered a cap gain you would have to pay taxes on. But then I'm not a tax guy. I know it can work that way if a bank a short sells a house for less than the mortgage.
Well that is a downright silly idea, now isn't it? Puzzle that out in your head... You owe 500K. So you are -500K. Your -500K is discharged, so you are net zero. So how does that translate to a 500K gain you have to pay tax on?
Do you have a wife, kids and house to lose? My guess the odds of suicide go up massively if you have those three to lose. A single guy renting a flat doesnt have much to lose. Even if you can withstand not topping yourself, there are also the long term effects to consider e.g higher risk of developing long term depression or medicating the pain away with drink and drugs. A slower form of suicide Some people are more resilient though and it doesn't effect them that badly
You're two for two on the out loud laughs. ....Did we ever figure out why TSLA went from $1600 to $400?
If he filed section 475 the last time he filed he tax return, then he should be able to deduct it all as income loss. But since OP said he is not trader, just investor then can only do $3k per year. Sorry OP for your loss.