Jim Trippon, CPA, a name growing popular among millionaires who seek financial advice, has helped many multi-million businessmen in their business and Hosuton tax management. His firm, J.M. Trippon & Co., has been bigger and bigger and and is now an established name in any Houston tax problems management.
This past year has been a brutal one for the stock market. For many taxpayers, their retirement and brokerage accounts have been cut in half and there seems to be no end in sight to America’s financial system’s problems.
A common question I get from my clients is: What can I deduct if my investments go down? The answer depends on the type of investment account you have and whether you still hold the investment.
To claim a deduction, the investment (assuming it is a stock or mutual fund) must be held in a taxable brokerage account to be eligible to write off as a loss. This means that all of us that have seen our retirement accounts go down (like IRA’s SEP’s, or 401K’s) are pretty much out of luck as to claiming a loss in those accounts. The IRS’s theory is that if a gain in the account would be non-taxable, a loss in the same account is non-deductible.
So let’s assume for a moment that we are looking at a loss in a regular (non-retirement) brokerage or mutual find account. In that case, a bad investment can only be deducted in the year it is sold or becomes worthless. If you sell the investment it is easy to calculate what your gain or loss is. Your gain or loss is determined by subtracting your purchase cost from your sales price. A tougher situation is the one where you believe the investment has become worthless. That is the situation for clients of Bernie Madoff in New York or for clients of Stanford Financial Group in Houston. In that situation the year of loss deductibility may depend on the outcome of Federal investigations or Bankruptcy Court rulings. Due to the difficulty in assessing the true time the investment became worthless, it is a good idea to get the help of a tax professional when claiming this type of loss.
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