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how to tax report lost equities
Old 08-25-2016, 10:09 AM   #1
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how to tax report lost equities

What is the proper tax handling for the value of equities lost by a brokerage?

Sensing problems at a brokerage, during January I instructed the firm to sell my stocks and send me a check. The check never arrived and subsequent paper account statements suggest the broker did not sell. More recently those account statements have stopped arriving. Though the brokerage web site exists it is no longer operational for my account. The brokerage refuses to answer questions about the status, instead it either sandbags or does not reply. Look like involvement of authorities will be necessary.

Assuming I don't recover the money this year, I'm thinking the proper tax reporting is to treat this as a capital loss, but at what value? The price I paid for the stocks originally? Their value at the date of the requested sale in January? Something else? In the event I recover the lost capital during a future year I would then report it as a gain.
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Old 08-25-2016, 10:20 AM   #2
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What kind of brokerage is this? You should probably focus on getting your money, you can't really declare it lost until all reasonable recovery options have been unsuccessful.

I think you need to file a police report, also a report with the state Attorney General, and SEC. For taxes, you should probably put off filing the tax return while the disappearance is being investigated.
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Old 08-25-2016, 11:45 AM   #3
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Please tell us if this is for $50 worth of stock or $5,000,000 worth of stock. I would do something different in each situation.

What you do will also help other people with assets at the same brokerage.

But the IRS has rules on casualty and theft losses. Here is Pub 547:

https://www.irs.gov/pub/irs-pdf/p547.pdf
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Old 08-25-2016, 12:14 PM   #4
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Frankly, I find this amazing. Please give us some more details.
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Old 08-25-2016, 12:18 PM   #5
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I thought that SIPC insurance, maintained by brokerages, covered this type of thing.

I think if the brokerage is insolvent, it will be forced into a liquidation "bankruptcy" proceeding at which point the SIPC coverage should kick in.

Was there a SIPC logo on any of the marketing material or statements from the brokerage?

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Old 08-25-2016, 03:02 PM   #6
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You've received good info. You don't report on tax return until all reasonable recovery steps have been taken. You would also report it as a casualty and theft loss, see Pub 547. If their may be insurance, you must file an insurance claim and settlement prior to determining your true loss.
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Old 08-25-2016, 03:51 PM   #7
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Thanks for your various replies. The brokerage is one you may know from their old TV ads with the baby. On the surface things appear normal, that is, it would appear the firm hasn't gone under, at least not yet. My question is about asset valuation in such situations. These stocks were worth substantially more in January (6 figures) than when I bought them (5 figures) long ago.
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Old 08-25-2016, 04:01 PM   #8
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The yelp reviews report problems similar to yours, assuming it's the same baby.

https://www.yelp.com/biz/etrade-financial-menlo-park

I would fax a letter stating you are going to the SEC if the problem is not resolved immediately. I suspect the stock is not lost, they just don't want to give you your money.
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Old 08-25-2016, 06:32 PM   #9
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The yelp reviews report problems similar to yours, assuming it's the same baby.

https://www.yelp.com/biz/etrade-financial-menlo-park

I would fax a letter stating you are going to the SEC if the problem is not resolved immediately. I suspect the stock is not lost, they just don't want to give you your money.
Thanks for that link.......I had no idea! Fortunately I don't have much w/ them but I was considering diversifying the brokerage stuff and your link saved me.
tho........to be fair, there are variations in the rating if you check different geographic regions but still on the lower side.

Googling tv ads and baby brings up "talking baby" and these guys.
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Old 08-25-2016, 09:26 PM   #10
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Originally Posted by GrayHare View Post
Thanks for your various replies. The brokerage is one you may know from their old TV ads with the baby. On the surface things appear normal, that is, it would appear the firm hasn't gone under, at least not yet. My question is about asset valuation in such situations. These stocks were worth substantially more in January (6 figures) than when I bought them (5 figures) long ago.
If the loss is finally proven your loss will be your cost basis. (Because you paid the tax on the basis before buying the stock, and never paid any capital gains that were not realized. Likewise if you Held GM your loss was basically the cost basis less any amount like a dollar the brokerage might have paid you. (I have seen several sales at $1 the lot to get rid of stocks of bankrupt companies, in this case mostly telecom companies that bought pieces of the baby bells and went belly up)
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Old 08-25-2016, 09:41 PM   #11
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Based on my 2-minute-google-fu, I would start with FINRA:

Investor Complaint Center | FINRA.org

From the above page:

"Problems addressed by FINRA:

Problems with Buy or Sell Orders: Sometimes, investors have problems with buy or sell orders such as slow execution, execution at an unanticipated price or failure to execute. Other problems with buy or sell orders can also occur."

The SEC sounds like the place to go if you had a problem with the company whose stock you bought, and SIPC only kicks in if your talking baby firm is bankrupt, which may or may not be the case.
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Old 08-25-2016, 10:27 PM   #12
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OMG! I'm with Schwab but just Googled etrade. You have my sympathy! ��
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Old 08-25-2016, 10:45 PM   #13
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I would complain to ALL the regulatory bodies giving details.
For example I know when I told the SEC fellow at a trade show, that the company 401K had deposited an extra 60K in my account, he was interested, as he said they could be hiding the money in my account as part of a money laundering scheme.

Why E-Trade would not give you the money is very strange, and there is no good reason for them not to do so. Perhaps they have been stealing, or misusing your funds.

This makes me think, I need to have more than 1 brokerage location.
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Old 08-26-2016, 05:11 AM   #14
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Wow - glad we transferred our (few) stocks out in 2000. I don't remember any problems as Fidelity handled the transfer.

From the reviews sound like this is routine, but I don't see why you wouldn't eventually get your money. Work the regulators!
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Old 08-26-2016, 08:04 AM   #15
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- Draft a letter to the appropriate regulatory body
- Send a copy of the draft along with a brief cover note to Baby Brokerage - perhaps to a high level officer
- If you hear nothing from brokerage submit the letter to the regulatory body.

I suspect this may light a fire underneath them to get you your money.

You may also wish to have the cover letter notarized and include a written request of what you are seeking. This should remove any fraud concerns and needs to verify identity.

"Never underestimate the value of substantial Attachments when requesting action from someone"

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Old 08-26-2016, 09:32 AM   #16
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Wow - glad we transferred our (few) stocks out in 2000. I don't remember any problems as Fidelity handled the transfer.
Same here. I got my (few) stocks transferred by Royal Bank of Canada last year with no issues. There were maybe $50 left in the account due to dividends payout happening at the same time that didn't get transferred, and they cut me a check when I called them about it, so it was easy for me, but I did see so many people complaining about the company when I googled, so it looks like I was one of the lucky ones.
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Old 08-26-2016, 10:13 AM   #17
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Couple Questions...
Quote:
Originally Posted by GrayHare View Post
Sensing problems at a brokerage, during January I instructed the firm to sell my stocks and send me a check.
How did you instruct them? in writing?? phone? do you have a record of the instructions?

Quote:
Originally Posted by GrayHare View Post
The check never arrived and subsequent paper account statements suggest the broker did not sell. More recently those account statements have stopped arriving.
do you have the last one they sent? Does it still list the securities in your account?


Quote:
Originally Posted by GrayHare View Post
Look like involvement of authorities will be necessary.
I would certainly continue to call their service center, and always ask for a manager.

I would check out the FINRA Complaint Center, they are the ones to file the complaint with.
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Old 08-26-2016, 10:26 AM   #18
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Originally Posted by Sunset View Post
I would complain to ALL the regulatory bodies giving details.
For example I know when I told the SEC fellow at a trade show, that the company 401K had deposited an extra 60K in my account, he was interested, as he said they could be hiding the money in my account as part of a money laundering scheme.

Why E-Trade would not give you the money is very strange, and there is no good reason for them not to do so. Perhaps they have been stealing, or misusing your funds.

This makes me think, I need to have more than 1 brokerage location.
+1

Don't think they're stealing. More than likely they own the shares(according to the transfer agent) but cannot account for which clients actually own them on their platform. Sad.
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Old 08-26-2016, 12:07 PM   #19
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+1

Don't think they're stealing. More than likely they own the shares(according to the transfer agent) but cannot account for which clients actually own them on their platform. Sad.
Save your account statements!
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how to tax report lost equities
Old 08-26-2016, 01:17 PM   #20
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how to tax report lost equities

Maybe I missed it. Did OP get a trade confirmation?


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