how to tax report lost equities

[GrayHare]

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.

 

[MichaelB]

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.

 

[LOL!]

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

 

[braumeister]

Frankly, I find this amazing. Please give us some more details.

 

[gauss]

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?

-gauss

 

[RE2Boys]

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.

 

[GrayHare]

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.

 

[Another Reader]

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.

 

[kaneohe]

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.

 

[meierlde]

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)

 

[SecondCor521]

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.

 

[gayl]

OMG! I'm with Schwab but just Googled etrade. You have my sympathy! ��

 

[Sunset]

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.

 

[audreyh1]

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!

 

[gauss]

- 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"

-gauss

 

[tmm99]

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.

 

[ChiliPepr]

Couple Questions...

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?

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?

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.

 

[MRG]

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.

 

[gauss]

+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!

 

[jazz4cash]

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


Sent from my iPhone using Early Retirement Forum

 

[ERD50]

I'm confused as to the problem. As was mentioned, was there a trade confirmation? How was the order placed? "Sometime in January"? Then looking at paper statements? That would be some lag time in this day and age. Why not check online?

What does 'sensing problems' mean? What kind of problems? And are these problems with the stock you held, or with the brokerage? If the stock was trading near zero, maybe there were restrictions?

I have accounts at Etrade for many years, and every one of my many, many transactions has been smooth (stock and mutual fund sales/buys, option sales/buys). I have an auto debit every month (my 'spending money'), and I always get my money. I'm not aware of any problems.

I suppose if you Google any large company looking for problems you will get screens full of them.

Specifics please - I want to know if I should move my accounts!

-ERD50

 

[CaliKid]

I have over a mil with etrade so you have my attention. Can you give some details? It doesn't make sense they would steal your stock.

 

[ERD50]

OP what's going on with this? Any updates/clarifications?

As you can see, a number of us have accounts at this brokerage, and we are interested in the problems you are having, and if we should be concerned about our own accounts.

Update please!

-ERD50

 

[GrayHare]

No change. Given their stonewalling I doubt I'll recover the losses for years, if ever.

 

[pb4uski]

.....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. ...

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.

So from what you have written it appears that you had a six-figure account, instructed them to sell everything and send you a check and you have not received the check and cannot even confirm that they sold the shares? Correct? And further, you can no longer access your account online and the company is not returning your calls. Correct?

Is there a branch near you? If so, have you gone there in person to try to sort this out?

Have you contacted law enforcement/authorities and if so, where does that stand?

If I had a six-figure portfolio stolen from me I would be rattling a lot of cages to retrieve the money and would be less focused on how the loss is treated for taxes.