The dangers of DIY investing: $800,000 tax bill on $45,000 of profit
Image
Region
North America
Topic
Accounting & Finance
Length
3 pages
Keywords
day trading
taxes
wash sales
active investing
passive investing
Copyright Holder
Society for Case Research
Student Price
$4.00
Target Audience
Graduate Students
Undergraduate Students
A new day trader discovered he owes $800,000 in taxes on a net profit of only $45,000. The trader contacted Brian, a financial planner, for help. Brian wondered if the tax preparation software used by the trader was calculating the taxes correctly. Brian also thought perhaps the trader did not follow the IRS’s wash sales rules, thus negating many of the investment losses that could have been used against investment gains.
Learning Outcomes
In completing this assignment, students should be able to:
1. Explain the importance of monitoring wash sales by different types and classifications of investors.
2. Demonstrate an appreciation of the competencies needed to be a successful investor.