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Stephen G.
Stephen G., Financial Advisor
Category: Capital Gains and Losses
Satisfied Customers: 7195
Experience:  Senior Tax Expert; CPA/PFS(retired)Personal Financial Planner; Small Business & Professional Mergers & Acquisitions
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Can you answer question about stock losses and the IRS?

Customer Question

Can you answer question about stock losses and the IRS?
Submitted: 2 years ago.
Category: Capital Gains and Losses
Customer: replied 2 years ago.
Its about losses,,,,,can i talk to u on phone?
Customer: replied 2 years ago.
How much of a loss,example,,,1,000.00 loss i take on a bad trade I traded on margin,,,,how much did i actually use if I only had to put up 30% of my own money and brokerage gave me a margin loan of 70%.. How much is actual dollar loss of my own money?
Expert:  Stephen G. replied 2 years ago.
Hello, my name is***** & I'll be helping you today. My goal is to give you a complete & accurate answer that you can understand.
You lost the $1,000., because you lost your "own" money & you are responsible for the rest as part of your remaining outstanding margin loan.
Think of it this way, suppose you borrowed $10,000. from the bank & invested it all in the common stock of Company "X". Then Company "X" reported a quarterly loss of $10,000,000. when everyone was predicting a return to profitability. The market immediately had a negative reaction and the stock dropped by 50% & you decided to cut your losses and sold all of your shares for $5,000.
How much did you lose?
You lost $5,000., because you invested $10,000. YOU BORROWED & only received $5,000. back from your $10,000. investment. You still have a $10,000. loan obligation but only $5,000. left to pay it off.