Trader nailed with $172 million bill in back taxes, asks 'What's the IRS?'

[Lightning Count]

Source: NY Daily News

He failed as a day-trader and barely survived in New York on a beer budget, but Marcos Esparza Bofill has been hit with a $172 million tax bill by the IRS.

"Who's the IRS?" Esparza Bofill, a twentysomething Spanish émigré, asked a friend who alerted him to his astronomical back taxes.

Esparza Bofill moved to New York from his native Spain in 2006 to try his hand at day-trading. When he nearly went bust after a year, he moved back home.

"He lost money while he was here. He couldn't afford rent," said friend Adam Baruchowitz of Brooklyn.

Esparza Bofill didn't file an income tax return for the year he was here swapping stocks - and that's leading to big problems with Uncle Sam.

The feds tracked his every trade. But because Esparza Bofill never accounted for his losses or expenses in tax filings, the IRS presumed he made a pure profit - a staggering $500 million in income. (more)

Read more: http://www.nydailynews.com/ny_local/2010/08/24/2010-08-24_thought_you_had_irs_problems_failed_daytrader_nailed_with_172m_bill.html

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You may want to familiarize yourself with the IRS before you start daytrading.

[bluestateguy]

1. Take the taxes and deport his ass

We have enough native born citizens who pull that kind of shit. We don't need more of it from "emigres".

[LanternWaste]

3. He moved back home after a year.

He moved back home after a year as per the story. :shrug:

[Lightning Count]

13. Why do I picture this as him living in SOHO.

Enjoying the nightlife and the city. Then one day getting a bill from the IRS and saying; "America is sooo stoooopid," and heading back to Spain?

[ThomasQED]

4. What kind of "shit" did he pull?

He was not successful, did not make any money.

And why the anger against an "emigre"?

[Lightning Count]

5. He skipped town without paying any taxes?

Is that not enough?

[seattleblue]

9. Lighten up. He doesn't owe any taxes. IRS software mistake.

[Lightning Count]

12. Did you forget the sarcasm notifier.

Of course he owes taxes. That is what happens when you keep zero records.

[seattleblue]

14. No that is not what happens.

All of those records can be reproduced. There are multiple copies of trades kept in many areas. If in fact he lost money on his trades he will not owe anything. Try again.

[pitohui]

17. seattle blue is right (this happened to a guy i know)

i know someone this happened to

day trading is not a legit source of income, it's like being a professional horse bettor you're GONNA lose money because it's illegal to get an advantage by using insider knowledge and if you don't have an advantaged in the long run just by math you HAVE to lose money to the house (broker fees)

my friend lost a great deal of money trying to day trade, since he had negative income and wasn't a CPA, he didn't know he had to file a return -- is it logical that in a year where you lost money and had no income you have to file tax returns? to you and me, yes, but to most people...no

irs comes one days wants a bit under $100K, friend then realizes he needs to complete a tax return, does so, includes his account number and a broker contact at the firm where he did the trades

a few months later the IRS sent him a check for several thousand dollars...he not only didn't owe money, the IRS owed HIM money they would have done better to keep their mouth shut because this disorganized dude would have never figured it out that he was due money...

[OnlinePoker]

20. Fine, but if he had made money he would have owed taxes.

If the IRS is tracking his every trade as the original article said, shouldn't they have known he made no money? They only track winning trades?

[pitohui]

24. you play online poker and you have to ask that question? REALLY?

of course they know he made no winning trades, it's a fucking gotcha

pay your fucking taxes,AND EVEN IF YOU OWE NO TAXES FILE YOUR FUCKING RETURN kid, or you'll get "gotcha'd" too, i've been in gambling since before al gore created the internet and i could tell you some shit

but if you have to learn the shit by getting a big tax bill for money you don't owe or by being put in jail and having your money seized...be my guest

it's a gotcha, bureaucracy is fond of gotcha, irs has been doing this for AT LEAST 20 yrs that i'm personally aware of which prob means they've been doing it for a lot longer when i was a homeless bum living on a friend's couch

[OnlinePoker]

26. I'm Canadian

We don't pay taxes on gambling or lottery winnings (unless you classify yourself as a professional gambler).

[TheMadMonk]

27. What the IRS sees on every sale is INCOME. It is not a part of the IRS' remit...

...to determine the origin of monies used for purchases, or to maintain a ballance sheet on your behalf.

It is the individual's (or corporate entitie's) responsibility to account for his expenditures.

At the most basic level, the tax office tallys up the income, subtracts your allowable deductions (as reported by you), and decrees that you owe tax on the difference. Or on occasion reluctantly admits that it owes you some money.

If you tell it nothing, it simply assumes all your income is profit and taxes accordingly.

[Yupster]

16. If he lost his butt

he wouldn't owe any taxes.

It didn't sound like he had any income.

[leahcim]

6. It is common....

It is a quirk of how brokers report things that it reports the proceeds of your stock sales to the IRS but not the amount of your stock purchases. So if you buy $100000 of a stock and sell it later for $90000, and your don't report it correctly yourself, the IRS goes by the partial information furnished by the broker and thinks that you made $90000 on that instead of losing $10000.

Day traders, even unsuccessful ones (i.e. most of them) make a lot of short-term trades where they sell stock for very close to what they payed for it, so the sum of all the sales could be much, much larger than any actual profit. If he furnishes the correct information about his purchases to the IRS, they should reduce his bill.

[Capitalocracy]

21. I bet I can guess why they do that

hey everyone, look how much money our customers made day-trading! You can do it too!

[mike r]

2. He probably didn't know who Uncle Sam was

or the difference between Thanksgiving and Halloween.
:sarcasm:

[MikeW]

7. if he doesnt know who the IRS is then its no wonder he was a failure at trading

[valerief]

8. Leona Helmsley asked the same damn question. nt

[jtuck004]

11. LOL - thought they were for the "little people" n/t

[rhett o rick]

10. Not smart business by the IRS to let him get that far behind. nm

[pitohui]

19. they think it's very smart and have been doing th is for at least two decades

they like to get bills get far behind because it increases the amt they claim they have earned from interest/penalties

when interest rates are low yet the irs claims it is owed 8 % interest (in an environment where the gov. is getting what? less than 1% interest loaning money at the prime rate) they are just stealing by letting the bill get bigger and bigger instead of informing the person there's a problem

this guy was in an "industry" that didn't, CAN'T make money in the long run (day trading stock) and properly owes no money, he just has to either prove it or never return to the usa, doubt right now he cares which...

[Capitalocracy]

23. Maybe the industry can't, but YOU CAN!

Click here to find out how! :puke:

[Yupster]

15. This is just a stupid form the IRS sends out

All he has to do is show his gains and losses and the problem will go away.

If you don't provide a cost basis to the IRS, they assume the whole trade was profit and you bought the stock for zero.

That's also true of brokered CD's.

If you buy a CD for $ 10,000 which pays $ 200 a year interest and then it comes due at $ 10,000 if you don't show them the basis of $ 10,000, they assume you got the CD for free and the whole $ 10,200 is gain. Like banks are giving people $ 10,000 cd's for free.

I am in this business and have handled a couple of dozen of these letters.

[pitohui]

18. yupster speaks truth

i honestly think it's a scam by the irs, they've been making this same "mistake" for two decades, most people then send in the paperwork and get it fixed but if only one in 200 persons is a little old lady w. dementia who then pays the bill...whoot! you win!

i really think the irs deliberately sets it up this way, we have an aging society and they get a lot of little "wins" by sending these letters

[Capitalocracy]

22. deliberate omission

if you asked why they do it I'm sure they'd tell you that "keeping track of losses ain't our job."

[Javaman]

25. okay, so let me get this straight...

He makes trades with imaginary money, creates imaginary debt that he now has to pay back? Other than himself and the IRS who did he hurt?

I only say this because this bullshit story is going to be the ringer of the week for the right wing anti-foreigners and the "moron day trader on the backs of the poor" for the left.

Stop looking at the shiny objects folks.

All this bullshit story serves is to distract from the real crooks on wall street.

Stay focused.