Online? Who was he playing Doug Polk? Side note guys, online poker is making a little resurgence if anyone is bored during the trading day and taking too many trades
Tax loss carryforward after going broke in trade?
- Thread starter OptionFool
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Online? Who was he playing Doug Polk? Side note guys, online poker is making a little resurgence if anyone is bored during the trading day and taking too many trades
Sorry to hear this. You can't change the past but you do CONTROL the meaning you give to this event in your life. You can choose to find an empowering meaning and there can be a positive impact from all of this in your life and for other people. Throughout history, many individuals have recovered from far worse. Why not you too? It will be a tremendous comeback story! Best wishes to you.
Yes, debt forgiveness is salt in the wound if I remember the old tax accounting class from eons ago.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.
I am pretty sure debt forgiveness outside of bankruptcy is taxable, but debt discharged through bankruptcy is not taxable.
thanks, but I feel I am too old to start over. I am 60. It took me 34 years to be a millionaire and then 1 day to lose it all. I have no job, I was retired for the last 18 years. At most I might make 30k a year with a job. My life is pretty much over.
Sorry to hear about that. Can you tell us more about that 1 day you lost all?
You know if you write a book about your loss story, it will help other traders and we will definitely buy the book if it can help.
The rules are very complicated. In general, forgiveness of debt is considered taxable income. But there are many exceptions. One of the exceptions, as you noted, involves bankruptcy.
Another exception, which might well apply to the situation described in the original post, involves insolvency. Forgiven debt can be excluded from income to the extent that the borrower was insolvent at the time the debt was forgiven.
The definition of insolvency is that your debts are greater than your assets.
If your home is worth $200K, but your mortgage loan is $190K, and you have $5,000 in your checking account, and no other assets, and you also owe $20,000 on credit cards, you are insolvent.
If you borrow money from grandma to pay off your credit cards, and you negotiate with the credit card banks to settle your credit card debt for 65 cents on the dollar, then you have forgiven debt which is potentially taxable. But because you were insolvent immediately before the debt was forgiven, some or all of the forgiven debt may not be taxable.
The IRS uses a complicated formula to determine what portion of the forgiven debt is taxable. In some cases, the entire amount that is forgiven may be excluded from income.
Anyone in this situation definitely needs a tax professional.
BMK
if you are designated as a trader and have MTM but you cant retroactively get MTM - you have to have MTM all set up properly well in advance before doing any trades that may fall under it https://greentradertax.com/trader-tax-center/trader-tax-status/section-475-mtm-accounting/
Perfect storm. Was short Vix via short puts on svxy, was with a good broker in fall 2017 then switched to a new broker. went busto in one day on Feb 5th, 2018. Lost over 1.4 mil. I would have only lost 10k with my old broker who had better risk management tools. Big gap down in after hours. I had closed out 1/3 of my position prior to the gap down. New broker allowed my size to be 10x bigger than the old broker.
