A Tax IQ Question

[joshuabarksatlcs]

A day or so ago, an Asker asked:  "I have a total of $710,271 in short and long term losses. Why does line 7 of my 1040 indicate a loss of only $3,000???"

@IRonMaN  said: Based on the sophistication of that question I'm thinking you might be looking for Turddotaxx.

@George4Tacks  said: It is because it is the right thing to do.

All good....  This would have been my comment: 

If it were me I would say: "Line 7 of my 1040 indicates a loss of $3,000.  OMG How in the world did I lose $710,271???!!!"

That got me thinking, Friday afternoon regimen (for those who don't already know, bourbon) in hand. 

Scenario one: If one had earned the money, would he/she/it lose $710K in one year?

Scenario two: If all that lost $$$ had been handed down, who would hand it down without handing down also the name of a prudent tax geek?    

Which brought e to this Tax IQ or rather trivia question.  Whoever comes up with a reasonable answer earns my kudos and a shot of my regimen.  (Didn't I mention this already?  I come here only for kicks, drama, and kudos?)

I lost a lot of $$$ in stocks.  NO margin account.  NO crazy calls and puts.   Just in stocks.

I lost $710,271 according to my 2021 brokerage statement.  (Likely Robinhood).  I know I did NOT have that much money in the account, but after entering the info in Turbo tax, OMG I lost $710,271.  I check the math, what I had entered in TurboTax.  NO math error there.  

What did I miss?

Can you come up with a plausible explanation for my $710,271 loss? 

[sjrcpa · Accepted solution]

You, or your broker, were churning the account.

[joshuabarksatlcs]

Very close. 

My official answer has to do with "What did I do wrong in Turbotax?"  which would lead to "Do I really have $710K less $3K loss to carry over?"  

That would be the intended Tax element of the my "IQ" or trivia question.  

[joshuabarksatlcs]

Remember, I do NOT have $710K in the account.

(I churn my comments to earn the "Number of postings Badge" LOL.

[joshuabarksatlcs]

Echoing Ironman, looking at the sophistication of the question, I think the answer to my Trivia question could very well be his problem in TurboTax.  But then, I could be overthinking.  Perhaps he really lost $710K.  If so, perhaps he saw this and decided to contact me to hire me to do his taxes.  LOL.      

[joshuabarksatlcs]

His problem in Turbotax.... "His" means the Asker's.  NOT Ironman's. 

Ironman's problem in Turbotax is that he doesn't has it.

[IRonMaN]

I just assumed the person asking the question was just as good at handling his or her investment portfolio as they are at preparing tax returns.  🤔

[joshuabarksatlcs]

I rather assumed his investing was not as bad as what TurboTax told him. 

I doubted he actually had $710K in realized losses (i.e. $708 = $710K - 3K loss carryover to 2021).

But I'd admit this is all because I have my Friday Bourbon in hand.

[sjrcpa]

Guess I flunked the test.

[joshuabarksatlcs]

@sjrcpa:

In live conversations, I frequently drop movie quotes, so much so that it gets annoying. 

If you allowed me, I'd quote Tom Hanks in You've Got Mail, and say, "Don't cry, Shopgirl."  

You came in very close.  The so-called "my official answer" is this:

The basis info provided in many brokerage statements is based on the adjusted basis.

In my question, as phrased, the mistake I made in TurboTax was that I didn't enter the wash sale info, which is typically included on the brokerage statement. 

Actually, sometimes, if you compare 

(1) Total Proceeds - Total Basis

to

(2) Realized Gain/Loss

on the statement, you would find a difference, which is = the total Wash Sale.

Of course, it all depends on how the reporting of the brokerage statement. 

As I said, the level of the Asker's sophistication was in consistent with the $701K loss..  My first impression of the Asker's post.

Just projecting my experience to the Asker's $701K Loss. 

Shop Talk.  Thus, "Don't cry, Shopgirl."    

[joshuabarksatlcs]

Of course, it all depends on the reporting of the brokerage statement. 

As I said, the level of the Asker's sophistication was inconsistent with the $701K loss...  My first impression of the Asker's post.

Correcting TUI (typing under the....), and churning my number of posts.

[sjrcpa]

I wasn't really crying.

[joshuabarksatlcs]

Good to know you weren't.  Now I have to watch YGM to see if Meg Ryan was...

Enjoy my shot of bourbon.  Just sent electronically.

[sjrcpa]

Thanks. I will. 🥃